Stocks To Buy: Leading brokerage Axis Securities has shared its report on 'Top Conviction Ideas - IT & Telecom'. It said that Q3 FY2026 results indicate continued sequential improvement in IT services and strong momentum in Telecom, highlighting compelling investment opportunities for medium to long-term investors.
Q3FY26 Review: Green Shoots in IT, 5G Monetisation Drives Telecom
IT Services: The IT sector reported broad-based growth ranging from -1.2% to 21.5% YoY in constant currency terms.
Among large-cap companies, TCS (+4.9% YoY) and Infosys (+8.9% YoY) delivered stable revenue performance despite seasonal softness and labour law impacts, while LTIMindtree (+11.5% YoY) benefitted from higher utilisation, digital and AI-led execution, and favourable geographical mix. Wipro moderated (+5.5% YoY), and HCL Technologies posted strong growth (+13.3% YoY), led by ER&D and software segments.
Mid-tier players Coforge (+28% YoY) and Persistent Systems (+24% YoY) outperformed peers on the back of faster deal conversions, sector-specific focus, and agile adoption of GenAI solutions. Operating margins remained broadly stable, supported by cost efficiencies, AI-led delivery improvements, and optimisation programs.
Telecom: The telecom sector continued its sequential growth trajectory, led by Bharti Airtel (+20% YoY) and Reliance Jio (+13% YoY). ARPU gains remained robust — Airtel at Rs 259 (+5.7% YoY) and Jio at Rs 214 (+5.1% YoY) — driven by premium plans, rapid 5G adoption, and expansion of home broadband. While Airtel moderates 5G capex, the focus is shifting toward enterprise solutions, digital services, and data centre initiatives. Jio continues heavy investment in 5G infrastructure to scale its mobility and broadband footprint.
Outlook – Moderate Growth with AI & 5G as Key Drivers
IT Services: We expect moderate growth for FY26, led by AI, cloud, and emerging technology adoption. Financial Services, Healthcare, Manufacturing, and Communication verticals continue to drive revenue, while auto and certain discretionary segments may remain subdued. Margin improvement is likely as deal ramp-ups, utilisation gains, and cost optimisation initiatives take effect.
Companies like HCL Tech, Persistent Systems, and Coforge are well-positioned to capture growth through niche capabilities and faster deal execution.
Telecom: The Indian telecom sector is poised for 10–12% revenue growth in FY26, supported by rising ARPUs, 5G monetisation, and premium plan adoption. With capex moderation and strong subscriber growth, both Airtel and Jio are expected to see margin expansion, enhanced cash flows, and reduced leverage. Enterprise solutions, cloud-edge services, and AI-enabled digital offerings will further strengthen long-term growth.
Key Monitorables
IT Services: Developments in macroeconomic conditions affecting client discretionary tech spending. Acceleration in AI and automation budgets across global enterprises.
Telecom: Pace of ARPU improvement through premium plans and subscriber conversion. Market share trends and incremental 5G subscriber additions.
Top Conviction Ideas IT, Telecom:
HCL Technologies – BUY | Target Price: Rs 1,880
Tech Mahindra – BUY | Target Price: Rs 1,870
Persistent Systems – BUY | Target Price: Rs 7,170
Coforge – BUY | Target Price: Rs 2,300
Bharti Airtel – BUY | Target Price: Rs 2,530
