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News Topical, Digital Desk : Stock Market News : IT sector stocks are under pressure following the recent stock market decline, but brokerage firm Nuvama Wealth Management believes the sector's long-term prospects remain strong. Consequently, the brokerage has assigned a 'Buy' rating to India's top 10 IT services companies.
The brokerage's new report said that while the sector may remain volatile for some time, the growth of IT companies is expected to continue in the medium and long term.
Nuvama recently upgraded the ratings of four major IT companies to Buy. These include HCLTech, Wipro, Tech Mahindra, and Hexaware Technologies. However, the brokerage also made some changes to the target prices of these companies.
- The target price of HCLTech has been reduced to Rs 1,550, which was earlier Rs 1,700.
- Wipro's target price has been reduced from Rs 255 to Rs 240.
- The target price of Tech Mahindra has been retained at Rs 1,650.
- The target price of Hexaware has been reduced from Rs 690 to Rs 550.
| Company / Shares | Rating | Target Price (₹) | Potential Gain (%) |
|---|---|---|---|
| Coforge | Buy | 2,100 | 84% |
| Mphasis | Buy | 3,100 | 42% |
| LTIMindtree | Buy | 6,100 | 41% |
| TCS | Buy | 3,300 | 31% |
| Infosys | Buy | 1,650 | 27% |
| Persistent Systems | Buy | 6,000 | 26% |
| Tech Mahindra | Buy | 1,650 | 24% |
| Hexaware Technologies | Buy | 550 | 24% |
| Wipro | Buy | 240 | 21% |
| HCL Tech | Buy | 1,550 | 14% |
Why is the IT sector under pressure?
According to brokerages, the biggest reason for the decline in IT sector stocks in recent months is growing concerns about Gen-AI technology. Investors fear that the increasing use of artificial intelligence could reduce demand for traditional IT services.
This is why the Nifty IT Index has fallen by more than 20% in the first two months of this year. Shares of almost all companies included in the index have seen declines ranging from 12% to 30%.
Why is the brokerage still optimistic? Brokerage
Nuvama says that despite the advent of new technologies, the need for IT service companies will not disappear. Companies will still need experts who can design, manage, and customize their systems.
Citing a famous quote by renowned author Mark Twain, the report said, "Reports of my death are greatly exaggerated," just as reports of the IT sector's demise are exaggerated.
The brokerage believes that Gen-AI will create new opportunities along with threats, and IT companies can capitalize on these opportunities. After the recent decline, the valuations of these stocks have become attractive for investment.
Overall, Nuwama believes that while volatility is possible in the short term, the story of the Indian IT sector is not over yet in the long term.
Read More: Brokerage Report: Brokerage report on these 14 stocks, expected to surge with the opening bell
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