Its a big sea of red across the tech sector. The Nifty IT Index has nosedived over 3%. All major IT stocks are down over anywhere between 3-4% individually. Index Heavyweights like Infosys, HCL Tech, Wipro, TCS are struggling amid mounting concerns over revenue growth, macroeconomic uncertainties, and brokerage downgrades.
Bloodbath across Nifty IT Index
As of now, the Nifty IT index is down over 3%. The biggest losers include Wipro, plunging nearly 5%, followed by Infosys, which has slipped 4.8%. Heavyweights like HCL Tech, Persistent, LTIMindtree, and L&T Technology Services are all down around 3%, while Tech Mahindra, Coforge, and TCS are also witnessing losses of about 2% in intraday trade.
The sharp fall comes amid cautious global cues and rising concerns over discretionary IT spending.
Let’s take a look into what brokerages are saying about the IT stocks
Morgan Stanley on Tech Sector: Revenue growth at risk
Global brokerage Morgan Stanley has raised a red flag over the IT sector’s near-term prospects, pointing out potential downside risks to revenue growth and valuation multiples.
The brokerage has downgraded Infosys to Equal Weight from Overweight, slashing its target price to Rs 1,740 per share from Rs 2,150 per share.
Some of the key insights of the brokerage include Coforge remains overweight, but target price has been cut from Rs 9,400 per share to Rs 11,500. TCS retains overweight status, though the target has been lowered to Rs 3,950 per share from Rs 4,660 per share.
HCL Tech and Tech Mahindra ratings remain at equal weight, with target prices trimmed to Rs 1,600 and Rs 1,550 per share, respectively.
The brokerage highlights that the shifting macroeconomic environment and rapid tech evolution could lead to slower revenue growth. In addition to this, while currency fluctuations provide some margin cushion, valuations might take a hit due to sector wide uncertainty.
Motilal Oswal: Cautious on IT Growth, Discretionary spending uncertain
The brokerage firm, Motilal Oswal has also turned cautious on the IT sector, citing uncertainty in discretionary spending due to changing macro conditions.
The brokerage believes that the anticipated revival in spending, particularly in US banking, healthcare, and high tech sectors might not materialise as expected.
Key downgrades in the IT sector
Motilal Oswal downgraded Infosys to Neutral, Wipro to Sell. The brokerage in its report noted, “Market expectations of 5-6% CC growth for Infosys could be at risk, and we see TCS coming in lower at ~3.5%. Wipro and Infosys face correction risk, leading us to downgrade our rating to Hold for Infosys and Sell for Wipro.”
The brokerage however, noted, “With mid-tier IT peers already operating at 14-15% margins, Tech Mahindra has the potential to exceed these levels, supporting a longer runway for 15-20%+ EPS CAGR beyond FY27.”
TCS and LTI Mindtree are Motilal Oswal’s preferred picks for risk reward balance. While highlighting of the near-term volatility, the brokerage finds TCS and LTIMindtree relatively better positioned due to their risk-reward equation. Meanwhile, HCL Tech’s diversified portfolio makes it resilient to short-term turbulence.