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Infosys shares have been falling since the IT giant reported weak Q4 results last month. Infosys stock tanked 15% on April 17 after the results were announced, and are now down over 16% year to date. In comparison the Nifty IT index has fallen over 2% in the last one month and 7.6% in the one year. The weakness in the IT sector has been primarily due to the slowdown in the US market owing to the banking crisis, and forecasts of the world’s biggest economy may slip into recession.
Analysts predict that the April-June quarter could be worse than the January-March quarter, and that the shares of IT firms may fall further as the signs of the strong bounce-back of the US economy slowly fades. Meanwhile, the fall in Nasdaq will continue to negatively affect the Indian IT sector. Despite all the negative cues, Infosys stock has a ‘Buy’ rating from multiple analysts, while some has downgraded it to ‘Sell’.
Why June quarter could be worse than March quarter for IT sector?
The June quarter could be weaker than the March quarter for many companies, except Infosys, according to analysts at Kotak Institutional equities. “We attribute the weakness to project pauses and cancellations in North America and select verticals such as banking and communications. The pause and cancellations materialized in February and accelerated in March. The full impact of this will be visible in the June 2023 quarter,” said analysts. After a 7-20% correction in stock prices on IT firms, valuations are reasonable for select companies but these valuations assume 3-4% growth acceleration and some level of margin expansion in FY2025E. Analysts believe that there are reasonable upsides in Infosys though it had a bad March quarter and could have handled expectations better. Still the fundamental underpinnings of the business are extremely strong.
Should you buy or sell Infosys stock?
Prabhudas Lilladher: Buy – Stop Loss: Rs 1200 – Target: Rs 1420 (11.7% upside)
Infosys stocks has witnessed a decent erosion recently and has indicated consolidation with support maintained near Rs 1220, said analysts at Prabhudas Lilladher. “Currently with the stock picking up gradually and with a move past the Rs 1280 zone would further strengthen the bias to anticipate for upward move in the coming days. With the RSI indicator showing significant pullback from the highly oversold zone has improved the bias to some extent,” said Vaishali Parekh, Vice President – Technical Research, Prabhudas Lilladher. With the chart looking attractive she anticipates a further rise and suggests buying Infosys stock for an upside target of Rs 1420 and stop loss at Rs 1200.
Reliance Securities: Sell – Target Price: Rs 1350
Analysts at Reliance Securities remain cautious as the concerns of the global slowdown and delayed decision-making in the US rises. “Due to lower earnings growth and valuation, we downgrade INFO to SELL from BUY with a revised TP of Rs1,350, (vs. earlier Rs1,750), valuing the stock at a revised P/E multiple of 18x on FY25E earnings (vs. earlier 22x),” said Reliance Securities.
Infosys stock may rise towards Rs 1400 if Rs 1200 support is not breached
“Infosys management’s forward guidance was relatively neutral. The stock is expected to trade within a wide range of 1200-1400. If buyers (bulls) can maintain support at the 1200 level, there is potential for an upward movement towards 1400,” said Kunal Shah, Senior Technical and Derivative analyst at LKP Securities.