Tech Mahindra Shares Ignite: Nuvama's 'Buy' Rating Fuels Optimism on Deal Wins and Margin Growth

Tech Mahindra, a prominent player in the Indian IT services sector, kicked off the trading day with a significant rally, seeing its shares climb over 2% in early trade. This impressive uptick comes on the heels of a glowing report from Nuvama Institutional Equities, which not only maintained its 'Buy' rating on the stock but also reiterated a robust target price of Rs 1,570, signalling strong confidence in the company's future trajectory.

Nuvama's optimistic stance is rooted in several compelling factors that paint a promising picture for Tech Mahindra.

A key highlight is the company's impressive traction in securing large deals, including a monumental $1 billion contract with a leading hyperscaler for network and infrastructure managed services. This landmark deal underscores Tech Mahindra's capabilities in high-value, transformative projects. Furthermore, the firm has also clinched a significant agreement with a major European automotive OEM, diversifying its revenue streams and showcasing its prowess across diverse industry verticals.

Beyond these substantial deal wins, management's unwavering focus on margin expansion is another critical driver of Nuvama's positive outlook.

The company has articulated a clear strategy to achieve mid-teens margins by fiscal year 2026 (FY26). This commitment to operational efficiency and profitability improvement is expected to significantly bolster its financial performance and shareholder value over the coming years. Investors are keenly watching these strategic initiatives, which are poised to unlock substantial long-term growth.

Adding to its appeal, Tech Mahindra's current valuation stands out as particularly attractive.

Trading at approximately 22 times its estimated FY26 earnings per share (EPS), the stock is currently available at a notable 20% discount compared to its Tier-1 IT peers. This valuation gap presents a compelling entry point for investors looking for growth at a reasonable price within the resilient IT services sector.

The positive momentum in Tech Mahindra's stock also resonated across the broader IT sector.

While some peers like Persistent Systems and Coforge saw modest gains, and Wipro experienced a slight dip, the overall sentiment for IT stocks remained cautiously optimistic. The benchmark BSE Sensex and Nifty 50 indices also traded with positive bias, reflecting a generally upbeat market mood. With strategic deal wins, a clear path to margin improvement, and an appealing valuation, Tech Mahindra appears well-positioned to navigate the evolving global technology landscape and deliver robust returns to its shareholders.