JP Morgan has reiterated its negative stance on Indian information technology (IT) services and downgraded the sector to underweight (neutral earlier post Q4-FY23 numbers), as it believes the overall demand environment for the sector still remains weak. The research firm expects most companies in the sector to disappoint while announcing their first quarter numbers for the current fiscal (Q1-FY24). Among stocks, it has placed Infosys, TCS, MphasiS in its 'negative catalyst watch'.
JP Morgan has downgraded the Indian information technology sector to 'underweight' as it believes the heydays of the sector are over. Rising margin headwinds in the near-term and the revenue headwinds in the medium-term from a potential macro slowdown, Ankur Rudra and Bhavik Mehta of JP Morgan said in the report, will mean that the sector's earnings upgrade cycle is behind. "We see peak revenue growth behind us and earnings before interest and taxes (EBIT) margins trending down from inflation, mean revision.
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