- IT stocks gained despite JPMorgan's cautious stance on demand and AI impact
- JPMorgan downgraded HCL Tech, Wipro, and Tata Technologies with lower price targets
- Preferred IT picks include TCS, Infosys, Tech Mahindra, Coforge, Persistent, Sagility
IT stocks remained among the strongest performers on Tuesday, even as JPMorgan struck a cautious note on the sector, citing an uncertain demand environment and the growing impact of artificial intelligence on technology spending.
The brokerage downgraded HCL Technologies, Wipro and Tata Technologies to Underweight from Neutral, while cutting their target prices. JPMorgan lowered its target on HCL Tech to Rs 1,000 from Rs 1,370, cut Wipro's target to Rs 160 from Rs 200 and reduced Tata Technologies' target to Rs 540 from Rs 560.
The brokerage remains selective, however. Its preferred names include TCS, Infosys, Tech Mahindra, Coforge, Persistent Systems and Sagility India, which it believes are better positioned to navigate the evolving demand landscape.
Amid the cautious outlook, IT stocks traded higher through the session. Tech Mahindra led gains among large-cap IT names, rising 2.5% to Rs 1,450.9. Infosys advanced 1.9% to Rs 1,048.4, while TCS gained 1.6% to Rs 2,092. Coforge, Persistent Systems and Mphasis also traded in the green, gaining between 0.3% and 0.5%. Oracle Financial Services Software outperformed with a 3.2% rise. Wipro was the lone major laggard, slipping 0.9% to Rs 173.
JPMorgan said the Indian IT services industry has been stuck in a low-growth phase, delivering just 2-3% revenue growth over the past three years. The brokerage warned that the sector now faces a rare combination of technology and business-cycle headwinds.
According to the brokerage, the impact of AI-led productivity gains is still in its early stages and could continue to weigh on revenue growth over the next two years. It expects large-cap IT companies to struggle to achieve mid-single-digit growth and instead hover around 3-4% revenue growth.
Given the uncertainty around when demand could meaningfully improve, JPMorgan has moderated its medium- and long-term growth assumptions for the sector.
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