IT Stocks Under Pressure: Why JM Financial Backs Infosys and Mphasis Ahead of Q4 Results

Synopsis: IT stocks face pressure from weak global demand and GenAI concerns. JM Financial remains positive on Infosys and Mphasis ahead of Q4 results. Earnings, deal wins, margins, and management outlook on AI and demand recovery will be key to determining future stock performance and potential re-rating.

India’s information technology (IT) sector is heading into a crucial earnings season, with companies set to announce their Q4 FY26 results over the coming weeks. The backdrop, however, remains challenging. Global macro uncertainty, cautious client spending, and rising concerns around Generative AI (GenAI) disruption have weighed heavily on sentiment. Despite this, brokerage firm JM Financial believes that selective opportunities still exist within the sector for investors willing to look beyond near-term volatility.

On April 1, 2026, Infosys gained 2% to close at ₹1,276 with a market cap of ₹5,17,595 Cr., while Mphasis Ltd gained 3.41% to finish at ₹2,124.00 with a market cap of ₹40,530 Cr.

Sector Faces Macro and AI-Driven Headwinds

The IT sector has been under pressure for several months, largely due to weakening demand from key global markets such as the US and Europe. Companies across industries are tightening their technology budgets, especially for discretionary spending, which has traditionally been a major revenue driver for IT services firms.

At the same time, the rapid evolution of Generative AI has introduced a new layer of uncertainty. While AI presents long-term growth opportunities, it is also raising concerns about potential disruption to traditional outsourcing and IT services models. Investors are increasingly questioning how quickly companies can adapt to this shift and whether existing business models will remain relevant. As a result, IT stocks have seen corrections, and a broad-based sector re-rating appears unlikely in the near term unless visibility on growth improves.

Q4 Earnings and FY27 Outlook in Focus

With Q4 results around the corner, investors are expected to closely monitor key performance indicators such as deal wins, order book strength, and margin stability. However, more than the quarterly numbers, management commentary will be critical in shaping market sentiment.

According to JM Financial, the focus is likely to shift toward FY27 guidance, which will offer insights into how companies are positioning themselves for the future. Investors will be looking for clarity on demand recovery, particularly in discretionary spending, as well as the pace of decision-making among global clients.

The strength of order books will also be an important indicator of revenue visibility. Companies that can demonstrate a stable pipeline of deals and sustained client engagement are expected to command better investor confidence in an otherwise uncertain environment.

Preferred Picks: Infosys and Mphasis Stand Out

Despite the broader sector challenges, JM Financial has identified specific companies that it believes are better positioned to navigate the current environment. Among large-cap IT firms, Infosys is the brokerage’s preferred pick. The firm sees potential upside driven by the possibility of improved guidance and steady execution.

In the mid-tier segment, Mphasis stands out due to its relatively stronger growth outlook and focused business strategy. The company’s positioning in niche segments and its ability to maintain client relationships are seen as key advantages.

Key Strategy for Investors

Given the current uncertainties, JM Financial is advocating a selective investment approach rather than a broad-based allocation to the IT sector. The brokerage emphasizes the importance of focusing on companies with strong operational visibility, predictable earnings, and the ability to adapt to evolving technology trends.

Cost optimization, margin discipline, and strategic investments in AI and digital capabilities are expected to differentiate winners from laggards. Companies that can effectively integrate AI into their service offerings while maintaining profitability are likely to emerge stronger over the medium term.

In conclusion, while near-term challenges persist, the upcoming earnings season and management outlook will play a crucial role in determining the sector’s trajectory. For now, stocks like Infosys and Mphasis remain on investors’ radar as relatively safer bets in an otherwise uncertain landscape.

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