The Indian IT sector is projected to report a subdued performance in Q4 FY26, primarily due to global uncertainties and disruptions from generative AI (GenAI). However, Kotak Securities maintains a cautiously optimistic outlook, citing potential year-on-year earnings improvements driven by a 6.5% depreciation of the Indian rupee against the US dollar, which is expected to boost margins for many IT firms. Despite these currency tailwinds, challenges such as geopolitical tensions, particularly the Iran conflict, and delayed decision-making by clients are impacting growth visibility.

Kotak Securities has identified five IT stocks that stand out based on their valuation and growth potential. These include Tata Consultancy Services (TCS), which is expected to lead growth among large-cap firms; Infosys, with a projected revenue growth of 3-5% for FY27; HCL Technologies, also expected to grow by 3-5%; Tech Mahindra, noted for its strong deal momentum; and Coforge, which trades at an attractive valuation of approximately 18x FY28 earnings. In contrast, Wipro is likely to guide for a -2% to 0% growth, facing significant pricing pressure and deal delays. Analysts caution that escalating geopolitical tensions and rapid advancements in GenAI could further complicate the sector's recovery.