Bank of America Starts Coverage on 4 Midcap IT Stocks; Coforge Gets 'Buy' Rating

Bank of America (BofA) has initiated coverage on four leading Indian midcap IT companies, assigning Coforge a 'Buy' rating while maintaining a cautious stance on Mphasis, Persistent Systems, and LTIMindtree. The brokerage cited differences in valuation, earnings growth visibility, artificial intelligence (AI) adoption, and long-term revenue potential as the key reasons behind its recommendations.

Among the four companies, Coforge emerged as Bank of America's top pick due to its strong execution capabilities, healthy deal pipeline, disciplined acquisition strategy, and growing presence in AI-led digital transformation projects. Meanwhile, Mphasis received a Neutral rating, while Persistent Systems and LTIMindtree were assigned Underperform ratings despite their strong operational performance, mainly because of expensive valuations and concerns over future profitability.

The latest brokerage report highlights that while India's IT sector continues to benefit from rising enterprise AI spending and digital transformation, stock selection has become increasingly important as valuations across the sector remain elevated. Investors are expected to focus more on companies with sustainable earnings growth, diversified client exposure, and scalable AI capabilities.

Highlights	Details
Top BofA Pick	Coforge
Buy Rating	Coforge
Neutral Rating	Mphasis
Underperform Ratings	Persistent Systems, LTIMindtree
Highest Target Upside	Coforge (19.6%)
Key Growth Theme	Artificial Intelligence (AI) & Digital Transformation

Bank of America Ratings on Midcap IT Stocks

Company	Rating	Target Price	Upside Potential
Coforge	Buy	₹1,725	19.6%
Mphasis	Neutral	₹2,440	8.5%
Persistent Systems	Underperform	₹4,875	Limited
LTIMindtree	Underperform	₹3,910	Around 6.5%

Why Coforge Is Bank of America's Top Pick

Bank of America believes Coforge offers one of the strongest combinations of revenue growth, execution quality, and attractive valuation within the midcap IT space. The brokerage expects the company to deliver nearly 12% organic revenue CAGR between FY26 and FY29, supported by consistent client wins and expanding digital transformation opportunities.

The report also highlights Coforge's disciplined acquisition strategy, which allows the company to integrate acquisitions efficiently without significantly impacting shareholder returns. This strategy could help the company outperform peers during periods of slower industry growth.

Another major growth driver is the company's increasing focus on Artificial Intelligence (AI). According to the brokerage, Coforge has strengthened its AI capabilities over the past year and has received multiple industry recognitions for its AI-led solutions. Strong demand from sectors such as Banking, Financial Services and Insurance (BFSI), government projects, travel, and digital engineering is expected to support future revenue growth.

Why Mphasis Received a Neutral Rating

Bank of America assigned a Neutral rating to Mphasis, with a target price of ₹2,440, indicating an upside potential of around 8.5%.

The brokerage acknowledged that the company has largely recovered from challenges related to client spending cuts, contract rationalisation, and weakness in the US mortgage business. However, it believes much of this recovery has already been reflected in the stock price, limiting further upside.

Another concern highlighted in the report is Mphasis' heavy dependence on the BFSI sector, which contributes nearly 67% of the company's revenue. According to BofA, expanding into additional industries would improve revenue diversification and reduce business concentration risks over the long term.

Why Persistent Systems Was Rated Underperform

Despite maintaining a positive outlook on Persistent Systems' operational performance, Bank of America assigned the stock an Underperform rating with a target price of ₹4,875.

The brokerage expects Persistent Systems to deliver nearly 14% revenue CAGR between FY26 and FY29, reflecting continued business momentum and strong demand for digital engineering services. However, it believes the company's premium valuation already factors in much of this expected growth, leaving limited room for meaningful upside.

As a result, BofA believes the current risk-reward equation is less favourable compared to other opportunities in the IT sector.

LTIMindtree Faces Profitability Concerns

Bank of America also initiated coverage on LTIMindtree with an Underperform rating and a target price of ₹3,910.

While acknowledging the company's strong operational execution, large deal wins, and margin expansion during FY26, the brokerage remains cautious about its medium-term outlook. According to the report, LTIMindtree is expected to continue investing aggressively in AI capabilities, new digital platforms, and next-generation technology services over the coming years.

Although these investments are expected to strengthen the company's long-term competitive position, they could also put pressure on profitability and margins in the near term.

Market Analysis

Bank of America's latest coverage reflects a broader shift in how investors are evaluating IT companies in the AI era. Instead of rewarding every technology stock equally, institutional investors are increasingly differentiating companies based on execution quality, earnings visibility, valuation, and their ability to monetise AI opportunities. As AI adoption accelerates across global enterprises, companies with diversified revenue streams, disciplined capital allocation, and scalable AI platforms are likely to attract higher investor interest.

The report also suggests that valuation has become a key factor after the sharp rally in Indian IT stocks over the past year. While companies like Persistent Systems and LTIMindtree continue to deliver solid operational performance, premium valuations may limit near-term upside unless earnings growth exceeds market expectations. In contrast, Coforge appears better positioned due to its relatively attractive valuation, strong deal pipeline, and growing exposure to AI-driven transformation projects.

What Investors Should Watch

Investors should closely monitor AI-related deal wins, quarterly revenue growth, margin performance, client spending trends, and management commentary on enterprise technology demand. Growth in BFSI, government digitalisation, travel technology, cloud migration, and generative AI projects will remain important drivers for India's IT sector over the next few years.

Which IT stock received a Buy rating from Bank of America?

Bank of America assigned Coforge a Buy rating with a target price of ₹1,725.

Why is Coforge Bank of America's preferred IT stock?

The brokerage cited strong execution, attractive valuation, disciplined acquisitions, AI leadership, and healthy growth visibility as the key reasons.

Why was Mphasis rated Neutral?

Although Mphasis has recovered operationally, Bank of America believes much of the recovery has already been priced into the stock, while its heavy dependence on the BFSI sector remains a concern.

Why did Persistent Systems receive an Underperform rating?

The brokerage expects strong earnings growth but believes the stock's premium valuation leaves limited upside for investors.

What is the biggest trend driving India's IT sector?

Artificial Intelligence, cloud computing, digital transformation, automation, and enterprise technology spending continue to be the primary long-term growth drivers.