Gen AI may shave 3% off large IT firms’ growth, prefer Infosys, Tech Mahindra, Coforge: Kotak

Indian IT is entering a slow-growth phase, according to Kawaljeet Saluja, Senior Executive Director & Head of Research at Kotak Institutional Equities. He said three forces are dragging the sector down—global macro headwinds, captive shifts, and the early impact of generative artificial intelligence (Gen AI).According to him, macro factors alone are shaving off nearly 250 basis points of industry growth, while captive shifts account for another 100–125 basis points.

Generative AI, he said, poses the next big challenge. Saluja estimated a gross hit of nearly 15% over three years, although the net impact works out to be closer to 8% after accounting for reinvestment in data foundations and modernisation. “For incumbents, the hit of generative AI on the overall growth rate would be around 300 basis points for the next three years,” he said, stating that larger IT firms like Infosys and TCS are more vulnerable than smaller challengers, which may use the disruption to win new clients.

Despite these pressures, Saluja expects the growth picture to improve by 2026-27 (FY27), as macro headwinds ease and the captive impact reduces, even though AI adoption accelerates. He also pointed out that, unlike semiconductor and hardware companies globally, Indian IT players in software and services see “negligible” direct upside from the AI boom.Also Read: JM Financial analyst sees attractive buying opportunity in these IT stocks

Regarding stock positioning, Saluja’s top bets remain Infosys, Tech Mahindra, Coforgeand Hexawarewhich he believes are well-positioned to navigate the sector’s shifting dynamics.

For the entire interview, watch the accompanying video

Catch all the latest updates from the stock market here