CLSA has shared its 2025 outlook on the IT sector, focusing on client sentiment, earnings prospects, and currency impacts:
Improved Sentiments Yet to Reflect in Commentary
- While client sentiment has shown improvement, this optimism is not yet evident in management commentary across major IT firms.
- For 3QFY25, CLSA anticipates revenue growth guidance from Infosys (INFY) and HCL Tech (HCL) to strengthen further.
Tailwinds from US Elections and Rupee Depreciation
- The stable demand commentary aligns with improved client sentiment, particularly following the US elections.
- A sharp rupee depreciation provides an incremental tailwind, enhancing earnings both from translational and transactional perspectives.
Adjustments in Estimates
- CLSA has increased its EPS estimates, factoring in a revised USD/INR assumption that reflects the currency’s performance.
Downgrade for Wipro
- Wipro (WIPRO) has been downgraded to ‘Hold’ from ‘Overweight’ in CLSA’s portfolio.
- The revised target price for Wipro has been set at ₹303, citing the lack of substantial near-term growth catalysts.
Top Picks and Broader Industry Outlook
- With enhanced client sentiment expected to flow into revenue figures, Infosys and HCL Tech are positioned to benefit the most.
- The IT sector continues to demonstrate resilience, bolstered by macroeconomic conditions and favorable currency trends.
Disclaimer: This story is based on CLSA’s research report. Business Upturn does not provide investment advice. Please consult a professional financial advisor before making any investment decisions.
