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    Goldman cuts India's Infosys, TCS to "sell" on looming slowdown

    Synopsis

    "We believe a slowdown in discretionary IT services spend around the growth and transformation agenda will be quite material and something not yet completely reflected in the street's double-digit revenue growth forecast for the industry for FY24," Goldman analysts said in a note.

    Goldman cuts India's Infosys, TCS to "sell" on looming slowdownReuters
    Goldman Sachs downgraded top Indian information technology service providers Tata Consultancy Services and Infosys to "sell," from "buy," citing a potential slowdown in dollar revenue growth in the face of impending macroeconomic stress.

    "We believe a slowdown in discretionary IT services spend around the growth and transformation agenda will be quite material and something not yet completely reflected in the street's double-digit revenue growth forecast for the industry for FY24," Goldman analysts said in a note.

    Goldman said it remains "more sanguine" on the EBIT margin forecasts than on revenue of Indian IT companies, given multiple levers such as higher employee utilisation, controls on variable pay and annual wage hikes.

    India's top IT services firms have started freezing or cutting staff bonuses, worried that tightening budgets at U.S. and European clients who are bracing for a recession will sharply hit their own profit as the pandemic-led boom fades out.

    The IT firms made a windfall when pandemic struck the world couple of years back as several global corporations poured millions of dollars to rev up their digital infrastructure.

    However, several top tier companies missed profit estimates in the April-June quarter due to higher costs.

    Goldman upgraded Wipro to "buy" from "sell," citing attractive valuations and a recent pickup in the company's order book.

    The Nifty IT index was down 3.1% on Wednesday as a surprise increase in U.S. inflation stoked fears of aggressive rate hikes by the Federal Reserve.

    The IT index has been one of the worst hit sectors, falling over 27% so far this year, underperforming benchmark Nifty 50 index, which is up 4%.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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