JPMorgan Shifts to ‘Neutral,’ Upgrades Ratings for Key IT Players in Response to Changing Economic Indicators

Leading brokerage firm JPMorgan has altered its outlook on the information technology sector, transitioning from a pessimistic stance to a more balanced ‘neutral’ position.

Motivated by anticipated shifts in the US Federal Reserve’s approach to rate cuts and a favorable economic base, the brokerage has upgraded ratings for major IT players, including Infosys and L&T Technology Services, to ‘overweight.’

Additional upgrades for TCS, HCLTech, Mphasis, and Persistent Systems have shifted them to ‘neutral’ calls from their previous ‘underweight’ status.

The market responded with a modest uptick in IT company shares on January 4, contributing to a 1% increase in the Nifty IT index. Despite a challenging macro environment in 2023, optimism about a smooth economic slowdown and potential interest rate reductions signals a more favorable landscape for the IT sector.

However, Kotak Institutional Equities forecasts a decline in revenues for IT giants Infosys, Wipro, and Tech Mahindra in the December quarter, citing factors like furloughs, weak discretionary spending, and project cuts impacting performance. Analysts suggest IT stocks could be a prudent long-term investment with reasonable valuations compared to other stocks that experienced substantial rallies in 2023.