The brokerage continues to remain cautious on the sector. Along with the downgrades, JPMorgan has also cut its price targets on these stocks.
| Stock | Rating | Previous Rating | Price Target | Previous Target |
| HCLTech | Underweight | Neutral | ₹1,000 | ₹1370 |
| Wipro | Underweight | Neutral | ₹160 | ₹200 |
| Tata Tech | Underweight | Neutral | ₹540 | ₹560 |
Why Is JPMorgan Bearish On IT Stock?
JPMorgan said India’s IT services sector faces an uncertain demand environment from an unprecedented confluence of technology and business cycle headwinds from GenAI-led deflation and geopolitics.
The note said that enterprises face a combination fear, uncertainty and doubt (FUD) from changing tech and geopolitics, with tech services budgets crowded out from spending on AI tokens and cloud, which is keeping industry growth recovery prospects uncertain.
It is for this reason that the Indian IT services industry has been stuck at a revenue growth between 2% to 3% over the last three years, the brokerage observed.
With AI deflation still only in its second year, the brokerage sees further headwinds to growth over the next two years.
JPMorgan does not expect largecap IT companies to hit mid-single-digit revenue growth going forward and expects that figure to continue hovering between 3% to 4%.
The note added further that the reverse downward cash flow (DCF) sanity checks drive target price-to-earnings multiple cuts of 10% – 25% across the board.
Here are the analyst recommendations on the three downgraded stocks:
| Stock | Buy | Hold | Sell |
| HCLTech | 15 | 15 | 17 |
| Wipro | 10 | 18 | 17 |
| Tata Tech | 2 | 5 | 10 |
Even as JPMorgan remains cautious on the sector as a whole, it does have selective preferences from the same. Its top “overweight” recommendations from the sector include TCS, Infosys, Tech Mahindra, Coforge, Persistent Systems, and Sagility.
HCLTech shares ended the previous session 2% lower at ₹1,108 apiece. The stock has declined 5% in the past month and 32.2% this year, so far.
Wipro shares ended the previous session 3.2% lower at ₹174.39 apiece. The stock has declined 15.7% in the past month and 34.8% this year, so far.
Tata Tech shares ended the previous session 1.1% up at ₹760.1 apiece. It has risen 12.2% in the past month and 18% this year, so far.
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