Jefferies Forecasts Valuation Gains for Indian IT Stocks
Jefferies reports that Indian IT stocks may see further valuation gains if revenue growth expectations stabilize and global AI spending concerns remain flat.
Brokerage firm Jefferies reports that Indian IT stocks could see further valuation gains provided revenue growth expectations remain stable and concerns regarding global artificial intelligence spending do not increase. The Nifty IT index rose approximately 14% in October, a rally the firm attributes to improved investor sentiment and price-to-earnings rerating rather than upgrades to earnings or revenue estimates.
Jefferies identifies Sagility as having the strongest rerating potential, estimating a best-case scenario of over 50%. Large-cap firms Infosys and Tata Consultancy Services also show more than 20% potential. Consequently, the brokerage raised its target prices for Infosys to Rs 1,160 and Tata Consultancy Services to Rs 2,125, while maintaining a Hold rating on Infosys and an Underperform rating on Tata Consultancy Services.
Despite these targets, the firm cautions that the risk-reward profile for large-cap IT stocks becomes unfavorable once valuations exceed 17-18 times earnings, unless the material growth outlook improves.
