Analysts may upgrade IT sector

Raise price targets amid hopes of uptick in demand

 

Expectations of an uptick in demand in the second half of the current financial year, and favourable currency movement may lead most analysts to upgrade the Indian information technology sector and also raise price targets for IT counters.

Recently, Nomura Equity Research upgraded sector heavyweights Tata Consultancy Services and Infosys citing receding risks due to delay in the formulation of the comprehensive immigration bill, and on hopes of improvement in demand, especially in the US.

“Three of the four macro indicators that we watch to assess demand in the IT sector have shown a turnaround,” Nomura said in its report.

“In addition to macro indicators, commentary on US and discretionary spending has improved across companies,” it added.

Shares of most Indian software exporters have rallied over the past few weeks, buoyed by the depreciation of rupee against the dollar. On Friday, the Indian currency dropped to a record low of 62.03 per dollar.

While most brokerage houses have a positive stance on the Indian IT sector, many analysts are of the view that they may look at raising price targets for the large IT stocks.

“Looking at the current trend, I will have to raise price targets for shares of big IT companies,” an analyst with a US-based brokerage said.

“But I will wait for a couple of weeks to see how rupee behaves before taking a final call.”