IT Stocks Decline Up to 2% Following Downgrade by Jefferies, AI Pain Expected to Persist

Indian IT Stocks Decline Amid AI-Triggered Disruption Concerns

On February 23, Indian IT stocks declined by up to 2.5% in intraday trading, with the Nifty IT index losing 1.33% or 400 points. This decline comes after global brokerage firm Jefferies downgraded the sector, citing concerns that the impact of artificial intelligence (AI) on the sector may not be over.

Key Losers

• Mphasis: 2.5% decline to ₹2,314.30
• Infosys and Wipro: 2% decline each
• LTIMindtree, Tata Consultancy Services (TCS), and HCLTech: up to 1.2% decline

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Jefferies Downgrade

Jefferies downgraded Infosys, TCS, HCLTech, Mphasis, LTIMindtree, and Hexaware Technologies, citing a worst-case disruption scenario where sector valuations could decline by an additional 30-65% from current levels.

Target Price Revisions

• Infosys: downgraded from "Buy" to "Hold", target price reduced to ₹1,290 (from ₹1,880)
• HCLTech: downgraded from "Buy" to "Hold", target price reduced to ₹1,390 (from ₹1,885)
• TCS: downgraded to "Underperform" from "Hold", revised price target of ₹2,350 (earlier ₹3,485)
• LTIMindtree: downgraded to "Underperform" from "Hold", revised price target of ₹4,300 (earlier ₹6,175)
• Mphasis: downgraded to "Hold" from "Buy", target price cut to ₹2,450 from ₹3,410
• Wipro: continues to be rated "Underperform" with a reduced target price of ₹180 (compared to ₹220 previously)

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Earnings Projections

Jefferies has lowered its earnings projections by 1-4% and now expects about 6% earnings compound annual growth rate (CAGR) for large-cap IT companies over FY26-28, with its earnings per share (EPS) estimates sitting 3-14% below market consensus.