What led to the recent decline in TCS, Infosys, Wipro share prices?

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IT Sector Stocks Decline

The Indian IT sector has been a shining example of India’s growth story over the past few decades. Marked by rising revenues and consistent increase in profits, the share prices of the companies in this burgeoning sector have created immense wealth for its shareholders who have been a part of this ride.

However, in recent times, the sector has come under pressure due to a barrage of headwinds. Yet, the sharp downturn witnessed by the Nifty IT index on June 6, 2023 has been particularly noteworthy. But why? What is the cause of this sharp decline today? Which developments have led to this fall? Let’s try and decode!

Profit booking: The decline in the Nifty IT index today can be attributed to mere profit booking by investors. This can be gauged from the fact that the Nifty IT index has rallied close to 3% over the past month. Moreover, at its peak, it gained over 5%. So, in order to pocket the profits, investors have been selling on the rise which in turn led to the sharp fall today.

Rate hike fears: The US Central Bank in its latest policy meeting has hinted at a rate hike pause. However, acting upon it looks like a whole different ball game altogether for the Federal Reserve. This is because inflation in the US, although down from its record-high levels, has continued to remain elevated.

Moreover, the not-so-upbeat recent US jobs market data also makes the case for a rate hike pause weak.

Consequently, these adverse developments from its core market of the US has rattled the Indian IT sector. Notably, if the Federal Reserve hikes the rate again, this will further derail the recent rally for the Indian IT sector and the downward spiral may continue. This is because the demand for the IT sector’s goods and services will continue to remain under pressure as slowdown in its core US market will persist.

Weak outlook by EPAM Systems: Another notable contributor to the fall witnessed in IT stocks today can be the weak outlook given by American IT company EPAM Systems.

The company reduced its revenue and earnings outlook for both the current quarter as well as the full year on the back of a volatile global economic environment. Notably, the company also remarked that its clients are expected to spend less on IT services which has led them to trim their outlook.

Consequently, the after effects of this muted outlook by the IT company has put into question the pace of recovery of the Indian IT stocks. Moreover, this development reiterates the fact that the Indian IT sector is still not out of the woods and a turnaround does not seem to be on the horizon.

IT Stocks: Analyst target price

Amid this sharp decline, what are analysts saying about the top IT companies of India and what are their target prices. Are the analysts positive about the share prices of companies like TCS, Infosys, Wipro and HCL Tech? Let’s find out!

TCS target price

NameRating Target price% Upside
JP Morgan SellRs 2,700-16.6%
Morgan StanleyNeutralRs 3,3503.5%
NomuraSellRs 2,830-12.6%
JefferiesHoldRs 3,3754.3%

 Infosys target price

NameRating Target price% Upside
BNP ParibasHoldRs 1,50017.1%
Kotak Institutional SecuritiesBuyRs 1,47014.8%
NomuraNeutralRs 1,2900.7%
JefferiesBuyRs 1,57022.6%

HCL Tech target price

NameRating Target price% Upside
Morgan StanleyBuyRs 1,1602.8%
JP MorganSellRs 880-22%
NuvamaHoldRs 1,1804.6%
ICICI SecuritiesHoldRs 1,065-5.6%

Wipro target price

NameRating Target price% Upside
Emkay GlobalBuyRs 47017.5%
Kotak Institutional EquitiesSellRs 360-10%
HDFC SecuritiesBuyRs 400NIL

(all data as of 6th June, 2023)