This IT stock tanked 4% on Sell rating; caught holding it? Check this out

At a time when IT stocks are riding high on Dalal Street, one stock has just received a downgrade from a global brokerage. Post downgrade, the stock slipped over 4 per cent on Thursday logging its biggest intraday percentage fall since May 2. 

This midcap IT stock is MindTree. Global brokerage Citi Research downgraded the stock to 'sell' from 'neutral, but raised price target to Rs 970 from Rs 875 earlier.

The stock tanked as much as 4.2 per cent to Rs 986.55 on the BSE. Over 694,000 shares exchanged hands on the counter against 30-day moving average of 140 lakh. 

In the last one year, the stock gained 89.27 per cent, and 62.27 per cent on a year to date basis. By comparison, Nifty IT index added 20.3 per cent YTD. 

"MindTree’s business has seen good turnaround, but this is priced into strong returns delivered in past 6 months," said Citi said in a research note.

"While near-term visibility looks decent, any slowdown from its top customer - which contributed 18 per cent to overall revenues in Q4 - is a risk. Justifying multi-year high valuations and significant premium to sector is difficult, given volatile performance over past few years, sectoral challenges and client concentration risk," the report added.

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In an April report, Emkay Global said it believes that the pick-up in growth rate would not be significant in Mindtree given its modest client mining activity (Top 2-10 revenue flat in FY18) and deal TCV (expiring in 1 year) growth of 4 per cent. 

Emkay maintained 'reduce' rating with target price of Rs 630, valuing at 15x FY20E earnings. 

Going by Reuters data, 8 of the 27 analysts covering the stock have a 'buy' or higher rating, 9 have 'hold' while 10 rate it at 'sell' or lower. The company's median target price comes in at Rs 850.