The major market of Indian software exporters shut down the information technology shares on Wednesday at a low -lying level due to fresh selling in the US. The report of Morgan Stanley, which cited risk on growth, also affected the morale. The performance of technical shares fell by 36,311, the Nifty IT index of 36,311, which is the lowest level since June 28. The Nifty IT index has declined by about 15 per cent in the last one month amid the uncertain scenario of the US economy. In comparison, the Nifty-50 has fallen by 2.5 percent.
Due to the recent developments, brokerage firms have expressed concern about the income scenario of the Indian IT sector and estimated that the revenue growth rate of these companies will be low later. According to Morgan Stanley Note, the economic and other major indicators are pointing to a slow improvement in the revenue growth in FY 26 as compared to the previous estimate. Apart from this, due to the continuation of the new technology cycle, they are now seeing the possibility of a transition phase as the expenditure is being given priority again and the growth rate remains soft for a long time.
Morgan Stanley’s Gaurav Radheria, Sulabh Govila and Sakshi Rana have said in a note, in this context we are decreasing our forecasts of revenue growth for the entire region in FY 27. Share towards us does not change much in income estimates as we take into account the price declining the rupee against the US dollar. However, we reduce our multiple for shares because there is no physical and positive catalyst if there is a risk of returning close to long -term average qualities of shares.
Morgan Stanley has downgrade to eclawe and prefer Tech Mahindra against HCL Technologies (HCLT). It has also cut the target prices of all major IT shares.
Morgan Stanley Note states that risk for growth has increased and we are reducing our growth forecasts to 100–200 basis points (BPS) for FY 26-27. We estimate that now the growth rate will be in accordance with or less than the trends of FY 24/25, assuming that economic instability prevents discretionary expenses and increases competition in cost -reducing projects.
IT shares fall drastically
Meanwhile, on Wednesday, the Nifty IT index saw the biggest decline and all its shares came down. L&T Technology Services was the biggest loss and fell by about 5.5 per cent to Rs 4,391. Apart from Morgan Stanley, analysts of Motilal Oswal Financial Services (MOFSL) have also taken vigilance about this sector. He has rated Infosys and LTT to sell neutral and Wipro to sell but Tech Mahindra has rated the purchase.
MOFSL said that the emerging background has made the forecast of discretionary expenditure in FY 26 uncertain and there is no possibility of proper improvement in FY 25.
MOFSL said that even after six months, the chances of rate cuts in the US have decreased and geopolitical/fees are overshadowing the risk stability. On the assessment front, the Note of MOFSL states that the Nifty IT PE remains at high premium than the Nifty PE despite the recent decline. Its current premium is 37 percent, which is still higher than the average of the last 5 years.
First Published – March 12, 2025 | 10:55 PM IST