Motilal Oswal has identified the IT sector as an attractive investment opportunity, assigning 'BUY' ratings to Infosys, Mphasis, and Zensar Technologies. The IT sector's weight in the Nifty 50 has dropped to a decade-low of 10 percent, increasing the potential for better returns.
Stocks to buy: Motilal Oswal has initiated coverage on three IT companies: Infosys, Mphasis, and Zensar Technologies. While IT services' share of Nifty 50 earnings has remained at 15 percent over the last four years, its weight in the benchmark index has fallen to a decade-low of 10 percent. In December 2021, this was 19 percent. Following the September quarter results, the brokerage sees an attractive investment opportunity in the IT sector, which led to the initiation of coverage. The brokerage has also upgraded Wipro with a ‘Neutral’ rating.
Infosys Target Price
Motilal Oswal has upgraded its rating on Infosys to ‘BUY’. The brokerage has set a target price of Rs 2,150 for the stock. Based on this, the stock has a potential return of approximately 40 percent. Infosys closed at Rs 1,544 on Monday.
Mphasis Target Price
The brokerage has also given a ‘BUY’ rating on Mphasis, setting a target price of Rs 4,100 for the stock. This presents an opportunity for up to 47 percent return in the stock. Mphasis closed at Rs 2,788 on Monday.
Zensar Technologies Target Price
Motilal Oswal has given a ‘BUY’ rating on Zensar Technologies. The target price for the stock has been set at Rs 1,068. Based on this, up to 50 percent return is possible in the stock. Zensar Technologies closed at Rs 716 on Monday.
Brokerage Report
The report states that while IT services' earnings share in the Nifty 50 has remained stable at 15 percent, its weight in the index has declined to a decade-low of 10 percent, compared to 19 percent in December 2021. According to the report, this decline presents an attractive opportunity for investors. The brokerage added that if the outlook proves correct, returns could be higher, as current levels already reflect the deflation caused by Gen-AI and a slowdown in demand.
They believe that the sector has bottomed out and risks are now skewed towards the upside. The brokerage has raised its growth estimates, anticipating a recovery in growth. This improvement is expected to begin showing from the second half of FY2027 and will become clearly visible in FY2028 when enterprises implement AI on a large scale.
