JP Morgan has placed Indian IT services provider HCL Technologies Ltd on “negative catalyst watch” ahead of the earnings season, citing the highest near-term risks for the company. Following the report, the tech gaints shares traded 1 per cent lower on Wednesday.
“We remain cautious on the IT sector as we see downside risks to earnings and multiples from the weak fourth quarter prints and FY24 guidance,” the brokerage said in a note.
JP Morgan said it expects HCL to negatively surprise analyst expectations, while also seeing downside risks to demand and growth commentary for Tata Consultancy Services Ltd , which is India’s top IT services provider, and Infosys Ltd, from financial year 2023-24.
“The lack of a stated target of double-digit revenue growth in FY24, an uncertain macro environment in addition to an unexpected CEO exit (for TCS), put estimates and multiples at risk, in our view,” JP Morgan said.
The brokerage also expected Infosys to give “soft” guidance due to the uncertain macro environment and the departure of Mohit Joshi, its president and head of banking, financial services and insurance.
Amid worsening global macros and banking turmoil in the US and Europe, the IT barometer has lost 4 per cent in the last one month. And now analysts do not foresee any positive triggers coming in from the Q4 results but largecaps are expected to fare better than midcaps.
Those tracking the sector closely expect IT companies to report muted revenue growth in Q4 owing to deterioration in demand caused by macro uncertainties, weaker discretionary spending, and the usual March quarter seasonality.
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