Shares of Infosys Ltd dropped by 3.5% in Tuesday’s trading session following a downgrade from Morgan Stanley, which expressed concerns over the IT sector’s macroeconomic environment and evolving technology landscape.
The brokerage downgraded Infosys to ‘Equal Weight’ from ‘Overweight’ and slashed its price target to ₹1,740 from ₹2,150, citing downside risks to revenue growth and valuation multiples.
IT Sector Faces Challenges
Morgan Stanley highlighted several key risk factors for the Indian IT sector:
- Demand softness
- Pricing pressures
- Potential slowdown in global IT spending
- Valuation concerns despite currency movement benefits
The firm suggested that TCS is a better bet than Infosys, while it also prefers Tech Mahindra over HCLTech and Coforge over Mphasis in the mid-cap IT space.
Revised IT Stock Ratings by Morgan Stanley
Apart from Infosys, the brokerage lowered price targets for other major IT stocks:
- Coforge: ‘Overweight’ rating maintained, target cut to ₹9,400 from ₹11,500
- TCS: ‘Overweight’ rating reiterated, target reduced to ₹3,950 from ₹4,660
- HCL Tech: ‘Equal Weight’ rating unchanged, target lowered to ₹1,600 from ₹1,970
- Tech Mahindra: ‘Equal Weight’ maintained, target cut to ₹1,550 from ₹1,750
Market Performance
At ₹1,604.70 per share, Infosys is trading near its intraday low of ₹1,600.20, significantly down from its previous close of ₹1,661.60. The company’s market capitalization now stands at ₹6.64 trillion.
Morgan Stanley’s cautious outlook signals further headwinds for Indian IT stocks, emphasizing that companies will need to navigate a challenging business environment in the coming quarters.
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