Exploring Indian IT Stocks: High Dividend Yields and Investment Opportunities

Is Now the Right Time to Invest in IT Stocks?

India’s IT sector is kicking off the Q1 earnings season. Investor interest is low, but valuations look very attractive. The Nifty IT index has dropped over 10% in 2025. This decline affects big names like TCS, Infosys, Wipro, and HCL Tech.

Dividend Yields at Decade Highs

Despite the drop, dividend yields for top IT firms are at decade-highs. This could be a great chance for investors. Foreign institutional investor (FII) ownership in IT services is at a 13-year low. Domestic institutional interest has also weakened.

Kumar Rakesh, an analyst at BNP Paribas, says:

“Such low ownership has historically been a catalyst for outperformance. Current levels suggest excessively bearish sentiment.”

How Are Stocks Performing Now?

Here’s a look at current stock performance:

• TCS stock has fallen 17% in 2025 but offers a 3.7% dividend yield.
• Infosys yields 3.2%.
• HCL Tech yields 3.7%.
• Wipro stands at 3.4%.

BNP Paribas believes these yields offer downside protection to valuation.

What to Expect This Earnings Season

The earnings season could be pivotal. HSBC expects modest growth of 0–1% in constant currency terms. This could signal a bottoming out of the earnings cycle. Dollar weakness is expected to boost Q1 estimates by 100–200 basis points.

Brokerage Positions

Brokerages are positioning accordingly:

• BNP Paribas favors Infosys, TCS, HCL Tech, and Persistent Systems.
• It downgraded LTIMindtree and flagged Wipro for significant underperformance risk.
• Nomura remains bullish on Infosys, Coforge, and eClerx.
• Kotak Equities favors Infosys, Tech Mahindra, and mid-caps like Coforge and Indegene.

Coforge is seen as a standout, with strong quarterly growth expected. BNP Paribas also notes that LTIMindtree could benefit in an improving environment.

Structural Shifts and Cautions

Structural shifts in the sector are making investors cautious. HSBC warns:

“Top-tier IT companies are no longer buy-and-hold compounding stories. Stocks will be a lot more cyclical going forward.”

Early Signs of Stabilization

Despite challenges like US tariff risks and sluggish spending, analysts see early signs of stabilization. Motilal Oswal notes:

“Client enthusiasm for serious GenAI productivity projects is rising.”

Anticipated US Fed rate cuts, a strong first half of FY26, and improving deal win rates could support a turnaround. With valuations now considered palatable, the earnings season could determine if IT stocks can recover and reassert leadership on Dalal Street.

Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India.