Global investment, management and consultancy services provider Morgan Stanley has picked LTI Mindtree, Infosys, HCL Technologies and Cyient as its favourite IT stocks.
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The brokerage has shuffled its order of preference for IT stocks as the macro environment remains in flux, impacting the revenue guidance over the near term.
Morgan Stanley also trimmed revenue and margin forecasts leading to a slight cut in price targets for some IT stocks.
The firm has double-upgraded Cyient to overweight from underweight and raised its price target to Rs 1,100 from Rs 730 earlier. The firm said that Cyient's company-specific initiatives are helping the margin, while carving out the products business will lead to value unlocking.
Price target on Infosys was trimmed from Rs 1,670 to Rs 1,625, still showing a 15.1 percent upside from the current trading price.
Morgan Stanley maintained an equal-weight rating on Tata Consultancy Services with a target price of Rs 3,350 per share, an upside of 4.5 percent from the current trading price.
The global investment firm, however, downgraded Tech Mahindra and Mphasis to equal-weight while the brokerage remains under-weight on Wipro and other ER&D (Engineering, Research and Development) names such as LTTS and Tata Elxsi.
The note further mentioned that the macro environment remains in flux, clouding the near term revenue outlook, but on a 2-year basis, growth should normalise.
The report also added that tailwinds could more than offset headwinds that benefit margins going forward. It trimmed margin assumptions on account of concerns around sticky onsite wage inflation however it still expects margins to improve in financial year 2024 and 2025.
Shares of Cyient are trading 3 percent higher at Rs 974.50. Eight of the 10 Nifty IT constituents barring Mphasis and TCS are trading with gains between 0.6 percent to 3.6 percent.