IT stocks dip as CLSA turns cautious on valuations

IT shares in Monday's trade (September 9) traded with minor weakness even as the headline indices recouped their morning losses. At the last count, Nifty IT was down 0.04 oper cent while Nifty 50 traded with marginal strength.

From the pack constituted by 10 stocks, only 3 stocks namely Infosys, TCS and HCL Technologies traded in the green, while Tech Mahindra, Mphasis and Coforge emerged as the top losers with a cut of up to 2 per cent. 

The index in the last one has leaped over 10 per cent, while its 1-year return is at over 30 per cent.

CLSA's view on IT stocks

The brokerage held that Nifty IT valuations are currently just 7 per cent away from Covid levels. Also, it cautioned investors and opined that investors need to be mindful and cautious of the sector's valuations. 

Further, it pegs the growth forecast for IT companies to be likely in high single digits in FY26/27. The export market share of Indian IT companies has also become stable, it added.

JP Morgan sees IT spending to pick up in the next 12-18 months

Meanwhile JP Morgan held that in the financial services industry, IT spending is consistently seeing recovery. It added that it in the last few quarters, top US banks have increased their tech spending. Also as the interest rates in the economy are set to head southwards, there is expected recovery in the mortgage business. 

Furthermore, in 12-18 months, tech spending in the BFSI space is seen to improve constantly. The brokerage sees stocks like TCS, Mphasis and Coforge in a better position. Also, HCL Technologies and Tech Mahindra have the lowest BFSI exposure.