Stocks to buy: Tech Mahindra, Coforge, Birlasoft among top IT stock picks by Nomura ahead of Q4 results

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Tata Consultancy Services (TCS) to report the strongest revenue growth of +1.5% QoQ in CC terms and expect Tech Mahindra to post the weakest growth of -1.6% QoQ in CC terms. In midcaps, it expects the strongest growth of +3.7% from L&T Technology Services (LTTS). Read here: Q4 results preview: IT sector likely to report muted revenue growth with stable margins; all eyes on FY25 guidance EBIT margins across most companies is estimated to have improved sequentially with the exception of HCL Technologies, LTIMindtree and eClerx Services, which may report some decline due to salary hikes, weak seasonality and investments.

Nomura remains cautious on the sector given limited visibility on a significant turnaround in discretionary demand for IT services. “We expect operating performance to vary significantly across companies in FY25F. Our FY25-26F EPS are 2-9% lower than the street across most of our coverage universe.

We remain selective in our picks," Nomura said. Its top picks are Tech Mahindra among largecaps, and Coforge, Birlasoft and eClerx Services among midcaps. It maintains a ‘Reduce’ rating on TCS, Wipro, LTI Mindtree, Mphasis and LTTS.

Also Read: Stock Market: Half of Nifty 50 constituents, two-thirds of sectoral indices trade at premium valuation: Motilal Oswal Here are top IT stocks to buy ahead of Q4 results: Tech Mahindra is expected to see a 1.6% revenue decline in CC terms during the March quarter led by a fall in both CMT and Enterprise verticals. Margins are likely to expand by 150 bps QoQ with a reversal in some one-off costs. Adjusted EBIT margin is likely to be flat at 7%, as per Nomura estimates.