Macquarie Turns Positive On IT Sector: Check Target Price For TCS, Infosys, HCL Tech

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The Indian IT stocks have been on the receiving end after good returns in the last few years. Last month, JP Morgan downgraded Indian IT stocks. However, there is good news for investors who invested in Indian IT companies. Macquarie has upgraded the Indian IT stocks. Let us look at the details.

The fall in IT stocks

Both mid and large-cap IT stocks have fallen considerably due to the concerns around fears of a US recession. On average, IT stocks have corrected around 30% from their yearly highs. The sell-off in the NASDAQ, impact of wage inflation on companies operating profitability, and rich share valuations have hit the IT sector of late. The BSE IT index is down 21.7% from its all-time high of 38,713.3 hit on January 17 this year.

Macquarie is positive about the sector

The international brokerage firm said in its recent report that the worries over demand in the IT sector are overdone, and all TIER-1 IT companies are trading at an attractive price after the recent fall.

It added in its report that the current situation for Indian IT companies is different from what it was in the 2000s. India's TIER-1 IT companies are strategic partners and not glorified staffing providers which will be the first to bear the brunt of cuts.

In the banking, financial services, and insurance vertical - which is the biggest vertical for most of India's tier-1 players - the demand is resilient, said Macquarie, pointing at JP Morgan increasing its 2022 tech spending by 12.8%.

Target price for different companies

As per the firm, the demand remains resilient for companies such as TCS, Infosys, Wipro, HCL Technologies, and Tech Mahindra. It has an ‘Outperform’ rating on all the above-mentioned stocks. Below is the target price for each:

  • Revised the target price for TCS is Rs 4,420 from Rs 4,440
  • Revised Infosys' target price to Rs 2,140 from Rs 2,170. 
  • On HCL Technologies, it has raised the target price to Rs 1,440 from Rs 1,410. 
  • For Wipro, it has increased it to Rs 660 from Rs 630 
  • Tech Mahindra's target price raised to Rs 1,730 from Rs 1,710

The Macquarie report is contrary to what Nomura and JP Morgan have projected. They have shared the report with a potential slowdown for IT services demand in FY24 as earnings growth slows down. Nomura was bullish only on Infosys and Tech Mahindra while JP Morgan was bullish on Infosys and TechM and Mphasis.