Infosys shares plunged nearly 5% on March 12, hitting levels last seen in July 2024, following downgrades from major brokerages amid growing concerns over reduced discretionary spending by US clients. The sharp decline in Infosys’ stock price also dragged down the Nifty IT index, which fell over 3% during the trading session.
Brokerage Downgrades and Market Impact
Morgan Stanley downgraded Infosys from ‘overweight’ to ‘equal-weight,’ citing slowing growth and valuation pressures. The brokerage also lowered its price target for Infosys from ₹2,150 to ₹1,740, highlighting concerns about weakening demand from North American clients and rising geopolitical uncertainties.
Motilal Oswal Financial Services also downgraded Infosys to ‘neutral,’ pointing to growing caution among enterprises due to global economic challenges and potential trade tensions triggered by US President Donald Trump’s recent tariff policies.
Motilal Oswal further adjusted its outlook on other major IT firms:
- Wipro was downgraded to ‘sell’ due to valuation concerns.
- Tech Mahindra was upgraded to ‘buy’ based on its strong growth potential.
- LTI Mindtree and TCS were identified as “preferred picks” due to their favorable risk-reward balance.
- L&T Tech Services was downgraded to ‘neutral’ over valuation concerns.
- Coforge and Persistent were retained as top mid-cap stock choices due to their long-term growth potential.
Sector-Wide Pressure on Indian IT Stocks
The Indian IT sector has faced significant challenges in 2025, despite the weakening rupee, due to a slowing US economy and uncertainties around trade policies. The Nifty IT index has declined by 14% this year, making it one of the worst-performing sectors after real estate.
North America remains a critical market for Infosys, contributing over 60% of its revenue in FY24. However, slowing demand and cautious spending by US enterprises have raised concerns about the broader outlook for Indian IT services.
Mixed Analyst Sentiment
Despite the downgrades, some analysts remain optimistic about Infosys’ long-term prospects. Last week, CLSA upgraded Infosys to ‘accumulate’ from ‘hold,’ setting a 12-month target price of ₹1,978. According to Trendlyne data, 28 out of 40 analysts tracking the stock have a ‘buy’ rating, with a consensus target price of ₹2,097—implying a potential upside of 26% from the current levels.
Infosys shares have gained 3.81% over the past year but have dropped 11.41% over the last month, including a 1.58% decline in the past week. The broader weakness in the IT sector was reflected in other stocks as well, with Wipro falling over 5% to ₹263 per share, while HCL Tech, LTI Mindtree, and Persistent all dropped by over 3%.
Market Outlook
Investors are closely monitoring the demand environment in the US, which remains a key market for Infosys and other Indian IT firms. While near-term challenges persist, analysts believe that strategic cost-cutting measures and improved demand visibility could help stabilize the sector in the coming quarters.
Disclaimer: The views and investment tips expressed by experts in this article are their own and not those of the publication. Readers are advised to consult with certified financial advisors before making any investment decisions.
