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UBS has downgraded the target price for Indian IT companies due to company-specific issues affecting revenue growth, yet believes the recent market correction is overdone, indicating more upside potential. Despite concerns over a US growth slowdown, the Nifty IT index rose 2.30%, with major IT stocks like L&T Technology Services and Tata Consultancy Services seeing gains of 2-3%. The sector is currently trading at a 5% discount to its five-year average, suggesting a near-term rebound may be on the horizon.
BNP Paribas anticipates a rebound in the IT sector, projecting high single-digit to near double-digit growth by FY27, despite current challenges. Analyst Kumar Rakesh advises investors to wait until April for a better entry point, as earnings cuts and conservative guidance are expected to stabilize the sector. He highlights Persistent Systems as a notable midcap stock while cautioning about macroeconomic risks.
Persistent Systems continues to demonstrate industry-leading growth, supported by improved realizations and a stable margin despite recent wage hikes. The company is focused on enhancing client relationships and investing in disruptive technology, with a positive medium-term outlook despite high valuations. Order bookings remain strong, although net headcount growth may not keep pace due to the strategic use of technology.
The Nifty IT index rose over 1% in early trade on December 5, buoyed by positive comments from Federal Reserve Chair Jerome Powell regarding US economic growth. All 10 constituents, including Persistent Systems and L&T Technology Services, saw gains, with Persistent's shares up over 2% after CLSA raised its target price significantly. Bank of America highlighted key trends shaping the IT sector's future, including a recovery in the BFSI sector and a rebound in cloud spending, while artificial intelligence is expected to positively impact the industry by 2025.
CLSA has raised its target for Persistent Systems to ₹8,462 per share, citing multiple growth drivers and improved margin forecasts, while Citi maintains a 'Buy' rating on Indus Towers with a target of ₹485 per share, anticipating significant dividends following Vodafone's stake sale. Additionally, Juniper Hotels has been initiated with a 'Buy' call and a target of ₹430 per share, benefiting from strong hotel demand growth in India.
The Nifty IT index fell over 1% on November 28, reaching 43,630, as all 10 constituent stocks declined amid concerns over slower future rate cuts following stronger-than-expected U.S. consumer spending data for October. This drop follows a 2% decrease in September and a 4% decline in October, despite an 8% rebound in November. The data indicated a 0.4% rise in consumer spending, surpassing expectations and suggesting sustained U.S. economic growth.
The child care market is projected to grow from USD 59.87 billion in 2023 to USD 88.22 billion by 2033, at a CAGR of 4.3%. The health insurance market is expected to expand from USD 1.78 trillion in 2024 to USD 3.63 trillion by 2034, growing at 7.4%. Other sectors, including clinical trials and pharmaceutical CDMO, are also set for significant growth, reflecting a broader trend in healthcare innovation and demand.
IT stocks have gained traction, with the Nifty IT Index rising nearly 5% over the past month. Bernstein analysts predict a growth upcycle driven by BFSI and AI-related deals, favoring companies like Infosys and TCS for their strong US market exposure, while mid-cap players like Persistent Systems are also expected to benefit significantly.
JPMorgan anticipates a revival in Engineering Research & Development (ER&D) growth by 2025, driven by a recovery in the automobile sector, despite ongoing challenges in telecom that may limit valuation upside. The firm favors KPIT Tech and Persistent Systems for their strong growth potential, assigning target prices of Rs 1,900 and Rs 6,100, respectively, while also highlighting L&T Technology Services and Cyient as key recovery plays.
Dalal Street faced a bearish trend as benchmark indices Sensex and Nifty fell due to persistent foreign fund outflows and selling pressure in IT stocks. Remarks from US Federal Reserve Chairman Jerome Powell regarding a cautious approach to rate cuts further dampened market sentiment, with the Nifty down 0.69% and over 10% from September's all-time highs. Additionally, Citi's downgrade of Indian equities, driven by concerns over weakening earnings momentum, has negatively impacted investor confidence.
Persistent Systems Limited
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The information provided herein is generated by experimental artificial intelligence and is for informational purposes only.
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