Even Nifty 50 heavyweights like Infosys and TCS have corrected over 20% during the last three months. The Nifty IT index had made an all-time high of 45,995 on December 13 last year.
Fears of recession in the US had led to the street worrying about growth prospects of these companies. North America is the largest market for most of these Indian IT companies.
Brokerage firm Motilal Oswal wrote in its note that the sentiment has turned cautious from January to March with enterprises adopting a “wait-and-watch” approach.Although the focus is yet to shift away from capex, the clients are still not prioritising services spending, according to the brokerage.
Motilal Oswal has downgraded Infosys to “neutral”, Wipro to “sell” and L&T Technologies to “neutral” due to the valuation discomfort. It added that a meaningful improvement in discretionary spending in financial year 2026 is no longer certain compared to the current financial year.
LTIMindtree and TCS are their preferred picks for their risk-reward balance.
Earlier, Morgan Stanley too downgraded Infosys to Equalweight and cut its price target to ₹1,740 from ₹2,150 earlier. It said that the relative valuations of IT stocks compared to the Sensex are still at their five-year average despite the recent correction. It also cut its price targets on stocks like Coforge, TCS, Wipro among others.
The Nifty IT index is down over 3% on Wednesday and is the top sectoral loser. The index has gained only on four instances in the last 23 trading sessions starting February 7.
