Shares of Indian IT companies like TCS, Infosys, Wipro, and peers such as Tech Mahindra and HCL Technologies will be in focus on Thursday, June 19. The Nifty IT index has declined nearly 10% so far in 2025, adding to the pressure on the sector.
Global brokerage firm Morgan Stanley has downgraded Tech Mahindra to ‘Underweight’ from its earlier ‘Equal-weight’ rating, even as it raised the target price slightly to ₹1,575 from ₹1,550.
At the same time, it upgraded Wipro to ‘Equal-weight’ from ‘Underweight’ and increased its target price to ₹265 from ₹
216 per share.
Among large-cap IT stocks, the brokerage prefers TCS (Overweight), Infosys (Equal-weight), and Wipro, over names like HCL Technologies (Equal-weight), LTIMindtree (Equal-weight), and Tech Mahindra.
In the mid-cap space, Morgan Stanley is ‘Overweight’ on Coforge and ‘Equal-weight’ on Mphasis, favouring them over engineering and R&D (ER&D) companies, where it maintains an ‘Equal-weight’ rating on LTTS and an ‘Underweight’ rating on Cyient and Tata Elxsi.
In its latest note on India’s IT services sector, titled “India Technology: IT Services”, Morgan Stanley said that stock prices have rallied since the April lows, offering a chance to rebalance portfolios. It believes any further rally should be used as a good opportunity to trim positions.
The brokerage sees a slight improvement in revenue growth forecasts, but reiterated its thesis that the sector is in for two years of muted revenue CAGR.
Key takeaways from Morgan Stanley’s note
– Growth outlook is slightly better than feared, with tighter guidance ranges expected.
– Deal pipeline and management commentary indicate weak discretionary spending and vendor consolidation opportunities.
– Despite modest improvements, the brokerage remains less constructive on the sector overall.
Explaining its cautious stance, Morgan Stanley mentioned that while the outlook has improved slightly since April, it remains weaker than expectations at the start of FY25.
Valuation multiples, although below five-year averages, are not compelling given muted revenue and earnings growth. On a relative basis (vs Sensex and Accenture), valuations don’t appear expensive, but the lack of key re-rating triggers remains a concern, the brokerage said in its note.