Jefferies upgrades Street's most hated stocks, says Q1 earnings not too bad

With the Nifty IT index now in a deep bear market, down 25% from its peak, global brokerage firm Jefferies has upgraded Dalal Street's worst-performing sector to ‘Neutral’. It also noted that the Q1 earnings season hasn’t been all that bad for India Inc.

“While we remain concerned about the long-term stock performance of IT companies given the single-digit EPS growth outlook, we believe conditions are ripe for a near-term tactical bounce, supported by attractive valuations relative to the Nifty, free cash flow, and under-ownership,” said Mahesh Nandurkar, analyst at Jefferies. “This should be similar to the recent bounce seen in the FMCG sector.”

The brokerage has added weight to Infosys in its model portfolio by removing BPCL (amid rising crude oil prices) and Welspun (due to concerns over US trade tariffs).


IT stocks have been under pressure due to weak discretionary spending by clients, macroeconomic and geopolitical uncertainties, and AI-driven disruption that threatens traditional business models.

IT bellwether TCS is down 27% so far this calendar year, while peers HCL Tech, Infosys, and Wipro have each lost at least 20% in value. Even midcap IT names like Persistent Systems are down 22%.

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Q1 earnings review

Jefferies' mid-quarter earnings review shows that downgrades (50%) outpaced earnings upgrades (40%) for FY26estimates across 113 companies in its coverage universe.

“Downgrades have averaged 57% over the past three quarters. The ‘beat’ ratio remained flat quarter-on-quarter at 44%. Earnings estimates for FY26 for MSCI India have been trimmed by 1.7% during the results season, and 8% earnings growth is now expected. Banks were the key reason for the downgrade,” said Jefferies analyst Mahesh Nandurkar.

On IT and banks, Nandurkar said Q1 numbers were mixed, while consumer staples showed sequential volume improvement, although EBITDA growth remained weak due to elevated input costs.

Meanwhile, Motilal Oswal noted that earnings for the 38 Nifty companies that have reported so far grew 7.5% YoY, beating estimates of 5.7% YoY. The upside was led by RIL, HDFC Bank, ICICI Bank, JSW Steel, Bajaj Finance, L&T, and M&M.

“These seven companies contributed 100% to the incremental YoY earnings growth,” the brokerage said. “Conversely, Coal India, IndusInd Bank, HCL Tech, Kotak Mahindra Bank, Axis Bank, and Eicher Motors dragged Nifty earnings lower. Of the 38 companies, seven reported below-estimate profits, fourteen beat expectations, and seventeen were in line.”

However, Nifty EPS for FY26 has been cut by 1.1% to Rs 1,110. FY27 EPS estimates have also been trimmed by 0.8% to Rs 1,297 (from Rs 1,308), led by earnings cuts in Reliance Industries, Axis Bank, Power Grid Corp, HDFC Bank, and Kotak Mahindra Bank, the note added.