Risk-Reward Turns Favourable for

INFY

Amid Currency Tailwinds

has been selected as this week’s tactical pick despite muted near-term prospects. The IT bellwether’s Q2FY26 performance showed steady revenue growth and margin stability, while large deal wins and AI-led initiatives provide medium-term optimism. With the stock underperforming peers and trading at a valuation discount, risk-reward dynamics appear favourable. - Revenue Guidance Reflects Seasonal Softness Infosys reported 2.2% sequential CC revenue growth in Q2FY26, with H1 YoY growth at 3.3%. FY26 guidance was revised to 2–3% CC, narrowing the range but retaining the upper end. This signals softness in H2 due to furloughs and fewer working days. - Margins Stable but Limited Upside EBIT margin improved 20 bps sequentially to 21% in Q2. However, subdued H2 outlook means margins are unlikely to expand further. Infosys has maintained its FY26 margin guidance at 20–22%, reflecting operational discipline but limited near-term improvement. - Large Deal Momentum Continues Q2 saw 23 large deals, 67% net new, with inflows up 24% YoY but lower than Q1. A $1.6 billion NHS UK mega deal was announced post-Q2, underscoring Infosys’ ability to secure transformational contracts despite demand moderation. Infosys is positioning itself as a leading Enterprise AI provider. Its proprietary Topaz suite and full-stack application services are expected to benefit as clients ramp up AI modernisation. With discretionary-heavy portfolios, Infosys is well-placed to capture AI-driven spending. The stock is down over 15% YTD, underperforming Nifty and the IT Index. At 22.7x FY26e earnings, valuations are below the 5-year average. With INR depreciation from tariffs and FII outflows, the risk-reward profile has turned favourable, limiting downside despite seasonally weak Q3.