Archive · 25 Aug 2026
AI Deals May Drive Mid-Cap Indian IT Recovery in H2FY27
Anand Rathi Research thinks Indian mid-sized technology companies may recover later in FY27.
Artificial intelligence is creating new work, such as helping companies install AI systems and improve old technology.
Software companies may earn from these opportunities before technology-services companies do.
Services companies could benefit more when AI projects become larger in FY28.
Persistent Systems had especially strong contract wins and is Anand Rathi’s top pick.
Mphasis also reported a large pipeline of AI-related business.
However, AI can reduce the amount customers pay for some technology work.
This, along with geopolitical problems and delayed projects, could keep growth slow for a while.
Anand Rathi Research expects India’s mid-cap IT sector to recover in H2FY27 as AI-related opportunities and deal conversions improve.
Enterprise software is expected to monetise AI first in FY27, while IT services may benefit more as deployments scale in FY28.
Persistent Systems reported 16.5% year-on-year constant-currency revenue growth and a 120% increase in total contract value in Q1FY27.
Mphasis recorded $461 million in net-new TCV, with about 63% linked to AI-led deals and its pipeline increasingly focused on AI.
AI-driven productivity gains, geopolitical uncertainty and delayed project ramp-ups could keep sector revenue growth muted through FY27.
- Who
- Anand Rathi Research, Persistent Systems, Mphasis and other Indian mid-cap IT companies.
- What
- A brokerage assessment says AI opportunities and stronger deal conversion could support a mid-cap IT recovery in H2FY27, while AI-related pricing pressure may limit revenue growth.
- When
- The outlook concerns FY27, with a potential recovery in H2FY27; services benefits are expected to scale into FY28.
- Where
- India’s mid-cap IT sector.
- Why
- AI is generating deployment, integration, modernisation and data-related work, while healthy deal momentum may improve operating leverage; AI-led deflation and geopolitical uncertainty remain risks.
AI Growth Opportunities
AI-Related Pressure
Revenue potential
AI Growth Opportunities
AI is creating additional work in deployment, integration, legacy modernisation, data optimisation, agentic operations, token optimisation and sovereign AI.
AI-Related Pressure
AI-led productivity gains and deflation may reduce pricing or revenue growth for some technology services.
Sector recovery
AI Growth Opportunities
Better deal conversion and operating leverage in H2FY27 could support a recovery, with Persistent Systems and Mphasis showing strong contract momentum.
AI-Related Pressure
Geopolitical uncertainty, delayed project ramp-ups and competition for consolidation and cost-take-out deals could keep growth muted through FY27.
Timing of benefits
AI Growth Opportunities
Enterprise software is expected to monetise AI first in FY27, while expanding deployments could create stronger services opportunities in FY28.
AI-Related Pressure
The brokerage expects the benefits to be back-ended, meaning near-term sector performance may remain weak despite long-term opportunities.
- Brokerage outlook
- Anand Rathi Research is structurally positive on IT and expects better deal conversion and operating leverage in H2FY27.
- Persistent Systems Q1FY27 revenue
- Revenue grew 16.5% year on year in constant currency and 4.1% sequentially.
- Persistent Systems TCV
- TCV rose 120% year on year to $1.15 billion; last-12-month TCV increased 40.2% to $3.03 billion.
- Persistent Systems rating
- Anand Rathi retained a Buy rating with a target price of Rs 6,931.
- Mphasis Q1FY27 revenue
- Revenue was $471 million, up 2.1% sequentially in constant currency.
- Mphasis AI pipeline
- Around 70% of Mphasis’ pipeline is AI-led, while about 63% of its $461 million net-new TCV came from AI-led deals.
- Mphasis rating
- Anand Rathi assigned a Buy rating with a target price of Rs 2,981.