IT stocks outlook: IT stocks to stay under pressure in the near term: Morgan Stanley

Mumbai: Morgan Stanley stated continued headwinds and earnings downgrade cycle within the info expertise sector have rendered the risk-reward unfavourable within the close to time period.

The brokerage has downgraded Wipro and

whereas selectively remaining chubby on , and .

“Close to-term headwinds and lack of catalysts may maintain sector efficiency beneath stress,” stated Morgan Stanley.

The IT index on the BSE ended down 0.2% at 27,122.90 after hitting a 52-week low throughout the session. These shares have been among the many prime losers to this point in 2022. The IT index is down 30% from the all-time excessive of 38,713.3 hit on January 17 this yr.

Morgan Stanley stated IT consensus earnings have declined within the final two quarters however there’s room for extra downgrades led by each income and margin cuts for FY24.

“We anticipate an FY22-24 earnings per share CAGR (compounded annual progress price) of excessive single digits, as FY23 earnings are being impacted by decrease margins whereas FY24 progress will doubtless be affected by slower progress,” stated Morgan Stanley. The brokerage added that IT sector shares are nonetheless buying and selling at premiums to historic averages.

Morgan Stanley prefers largecap IT shares over midcap IT firms.

Inside largecaps, Morgan Stanley prefers Tech Mahindra as a consequence of good progress visibility and cheap valuation. The brokerage additionally prefers Infosys as a consequence of market share positive aspects and valuation low cost to

. On and L&T Infotech, it has an underweight score with goal costs of ₹2,890 and ₹3,850, respectively.