Jobaaj Stories
Global Brokerage JP Morgan has said in a report that the Indian IT sector could face further downgrades and that it was underweight in the sector.
TCS and Infosys, the top 2 IT services companies of the country have published lower-than-estimated figures for FY23 recently as revenue growth has contracted to single digits. According to JP Morgan, the weak results are evidence of weakness in the BFSI and TMT sectors, which account for a sizable chunk of IT revenues.
Moreover, the firm also says that the full impact of the weakness was not clear as Q1FY24 is expected to be sub-par due to weakness in the BFSI, TMT, and manufacturing sectors in the US could drag down project figures.
According to the brokerage, TCS, LTIMindtree, HCL Technologies, and Mphasis are at the greatest risk of downgrades while Tech Mahindra and Wipro are the companies that will face greater earnings risks.
International recessionary headwinds are expected to pressure IT stocks for the coming months but the same is expected to ease in the long term.
The Nifty IT index had seen some recovery during January 2023 but began sharply declining around mid-February. The index was trading around 26,656.85 at the time of reporting, indicating a decline of 15.2% in less than 3 months!
- Aman Agarwal
