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JM Financial recommends non-financial PSUs given cheap valuations

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JM Financial has downgraded the IT sector to 'underweight' from 'neutral' given the unfavourable risk-reward situation. Suhas Harinarayanan, head of institutional equity research at the company, shared his views on the sector.

JM Financial has downgraded the IT sector to 'underweight' from 'neutral' given the unfavourable risk-reward situation. Suhas Harinarayanan, head of institutional equity research at the company, shared his views on the sector.
"We had made the sector an overweight towards the end of December 2017," Harinarayanan told CNBC-TV18 on Thursday.
“Sometime in CY2018, the sector was no longer seeing earnings upgrade but probably it was trading at long-term averages in terms of multiples and that’s the time we decided to go neutral on the sector,” he added.
Talking further about the sector, Harinarayanan said, “A lot of the earnings upgrade have come purely on the back of currency being significant driver compared to analysts’ estimates because analysts’ estimates also moved up.”
“There are no earnings upgrades which have happened in the last quarter or two on the sector and at the same time the sector is also trading at a premium to its historical average, whether largecap or midcap IT,” he said.
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