Washout Year for Indian IT Firms: The analysts at J.P. Morgan are hopeful that they will analyze the results of the upcoming quarter’s performance and comments from Indian IT companies for signs of improvement in deal signings in the financial year 2025.
Analysts Ankur Rudra and Bhavik Mehta said in a note on Wednesday, “We have turned negative on this sector as we did not see meaningful demand growth in our recent checks. We believe the overall setup is not as positive as the previous quarter.”
Major IT companies including Infosys, TCS, Wipro, and HCL Tech have previously warned that customers, mostly U.S.-based, are cutting their IT expenses, delaying, and even canceling contracts due to slower economic growth and concerns of higher interest rates in the long term.
The analysts mentioned, “Investors have accepted that fiscal year 2024 is a write-off and have set their sights on fiscal year 2025 for a rebound.” This indicates that the Nifty IT Index has outperformed the blue-chip Nifty 50 in the last three months.
Analysts stated that the focus for this quarter’s earnings report will be on the trajectory of deals and growth in fiscal year 2025 versus renewals versus new deals, as well as a divergence among companies.
However, Rudra and Mehta noted that in their recent interactions with various industry executives, they did not see “meaningful signs of a demand recovery.”
“Some green shoots are visible on some paths, but the decision-making process and the speed in deals remain volatile,” they added. They are more negative on this sector compared to the broader market expectations.
Similarly, in comparison to market expectations for mid-cap growth, it anticipates low double-digit growth for mid-cap companies.
Nonetheless, J.P. Morgan upgraded Infosys from “underweight” to “neutral,” citing lower expectations and a significant deal win providing visibility into fiscal year 2025.
Also, as the equity markets are experiencing a downturn, tension among investors is on the rise. Among the top ten most valuable companies, five recorded a decline of ₹62,586.88 crores in their combined market valuation last week. Tata Consultancy Services (TCS) and Infosys emerged as the biggest losers in the market last week.
Last week, the BSE benchmark fell by 180.74 points or 0.27%, and the Nifty dropped by 35.95 points or 0.18%. TCS’ market valuation decreased by ₹26,308.58 crores to ₹12,91,919.56 crores.
On the other hand, Infosys saw a decline of ₹25,296.43 crores in its valuation, which was ₹5,95,597.10 crores previously. On Friday, the share price of the tech giant on the BSE fell by 0.18% to close at ₹3,530.75 per share.
Read More: Market Shakeup: Top 10 Valued Firms Lose ₹62586 Crore; TCS and Infosys Hit Hardest
