Why Does Nuvama See Value in Infosys Despite a Muted FY26 Outlook?
Nuvama has reiterated its Buy rating on Infosys with a target price of ₹1,800 (revised from ₹1,850), highlighting that the IT major’s in-line Q2FY26 performance and strong execution pipeline justify continued optimism. Despite slower revenue momentum, the brokerage believes the stock offers attractive valuation comfort.
Infosys reported stable growth across most verticals, though retail remained the only laggard segment sequentially. Management commentary suggested that FY26 will see lower pass-through revenue compared to FY25 as clients tighten discretionary IT budgets. Nonetheless, digital transformation deals and cost optimization programs remain strong levers for medium-term growth.
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Nuvama noted that Infosys continues to maintain a resilient margin profile despite pricing pressure in renewal deals. Its focus on automation, AI-led cost efficiencies, and large transformation contracts is expected to stabilize operating margins in the 20–21% range for FY26.
The brokerage also highlighted that the company’s valuation remains attractive at ~22x FY27E earnings, which is at the lower end of its five-year average. This suggests limited downside and potential for steady re-rating once global tech budgets start normalizing in the next fiscal year.
Infosys’ consistent performance across geographies and service lines continues to reflect management’s disciplined execution. While demand remains patchy, the company’s healthy deal pipeline, cash generation, and dividend payout make it a preferred pick for medium-term investors.
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With healthy deal wins, a strong leadership in cloud and digital transformation, and resilient operating margins, Infosys continues to offer long-term stability in an uncertain IT environment. The key watchpoint remains client budget normalization in the U.S. and Europe.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that Infosys continues to balance growth with operational discipline. For investors, it remains a core IT holding backed by consistent cash flows and low leverage. Explore more expert-driven analysis at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries
- Why Is Infosys’ Valuation Attractive Compared to Peers?
- Can Infosys Maintain Margins Amid Global IT Spending Cuts?
- Will Digital Transformation Deals Offset Slower Discretionary Spending?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
