IT stocks, including Tata Consultancy Services (TCS), Infosys and LTM, will be in focus on Friday after brokerage firm Kotak Institutional Equities downgraded its ratings on these shares.
TCS, India's biggest IT services exporter, has been downgrade to ‘Add' from ‘Buy', with target price maintained at Rs 2,450 apiece.
Kotak Equities noted that the mega deal wins have improved the past three quarters of TCS, which is a positive, but not sufficient to drive material growth improvement, offsetting headwinds.
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Inorganic strategy started off with a couple of rather unexciting Salesforce services acquisitions, but has stalled since. Additionally, data center play is interesting, but is in initial stages, Kotak Equities said.
It believes better revenue growth in FY27 was largely due to the non-recurrence of higher headwinds, largely client-specific in nature.
Infosys Set To Underperform
Kotak Equities downgrade its rating on Infosys shares to ‘Add' from ‘Buy', with a target price of Rs 1200 apiece, as it believes the near-term prospects are not encouraging.
Kotak expects Infosys to underperform on organic growth relative to TCS, HCL Technologies and Cognizant in FY27.
It believes loss of share in a large European account to peers poses initial headwinds to growth in FY28 as well.
‘Sell' LTM
Kotak Equities also downgrade LTM to ‘Sell' from ‘Reduce', but raised its target price to Rs 4,150 from Rs 3,900 earlier.
It noted that the execution strength has not been sufficient to pull away from the gravity of industry headwinds and client-specific issues.
LTM has been able to scale up top-two accounts to very large sizes, progress in other accounts has been rather slow. Additionally, acquisition of Randstad entities has potential but requires strong execution, Kotak said.
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