Jefferies Downgrades Infosys, TCS and Four Other IT Stocks Due to AI-Related Concerns, IT Index Falls for Fourth Consecutive Day

IT Sector Declines for Fourth Straight Day

On February 23, the IT sectoral index declined by 1.5% in late morning trade, with shares experiencing a fourth consecutive day of decline. The sector's downturn was triggered by Jefferies' downgrade of six IT shares, citing concerns over the impact of artificial intelligence (AI) on the industry.

Jefferies Downgrades Six IT Stocks

Jefferies downgraded six IT stocks, including Wipro, which fell by nearly 3% and was the worst-hit in the index. Infosys, Tech Mahindra, and HCL Technologies also declined by 1-2%. The brokerage noted that AI may structurally change the business mix of IT services companies towards consulting and implementation, while shrinking the portion of managed services.

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Target Price Cuts

Jefferies downgraded Infosys to 'hold' and slashed its target price by 31% to Rs 1,290. The brokerage also downgraded HCL Tech to 'hold' and cut its target price by 26% to Rs 1,390. Further, Tata Consultancy Services was downgraded to 'underperform' with a target price trimmed by 33% to Rs 2,350.

Other Downgrades

Jefferies also downgraded LTIMindtree and Hexaware Technologies to 'underperform' and cut their target price by 30% each to Rs 4,300 and Rs 460, respectively. Additionally, Mphasis was downgraded to 'hold' with a target price trimmed by 28% to Rs 2,450.

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Top Picks

Jefferies prefers Coforge, Sagility, and IKS Health as top picks in the IT space.