Morgan Stanley expects ‘slower growth phase’ for IT firms till Sep 2023

Risk reward is less favourable for India’s information technology services sector, given two-year earnings CAGR will moderate, according to Morgan Stanley.

The financial services provider assigned key ‘overweight’ on Infosys Ltd., Tech Mahindra Ltd. and Mphasis Ltd., while it remained ‘underweight’ on Wipro Ltd., HCL Technologies Ltd. and Cyient Ltd., according to its investor presentation on technology and telecom sectors released on Thursday.

This comes amid a series of downgrades by Morgan Stanley’s global macro economic team of global growth forecasts for 2023 for both the U.S. and the European Union.

A CIO survey by Morgan Stanley also pointed at downward revision of the expectations of 2022 IT services budgets in each of the last four quarters.

Despite strong Q1 numbers, Morgan Stanley has observed that leading indicators such as book-to-bill and headcount addition have shown signs of moderation, as it expects a slower growth phase till September 2023 with possibility of recovery from second half of FY2024. Bloomberg