Infosys, Wipro, other IT stocks in focus after massive wipeout in 8 sessions. What’s JPMorgan saying?

Shares of Wipro and Infosys, and other IT stocks, will be in focus heading into trade on February 16 after their ADRs rebounded 4% and 3% on Friday as value buying emerged at lower levels. This came after a punishing two-day rout that dragged the companies’ US-listed shares down by as much as 14.5%.

The broader damage, however, has been significant. Nearly Rs 5.7 lakh crore has been wiped out from the sector in just eight trading sessions, with the Nifty IT index tumbling 19% over the same period. On Friday, the weakness was not limited to these two stocks. TCS, the IT bellwether, sank to an over five-year low, while Coforge, LTIMindtree, HCL Tech and Mphasis declined by up to 4%.

The negative sentiment was triggered by US artificial intelligence startup Anthropic, which earlier this month introduced a new tool tailored for corporate legal teams. Anthropic, the maker of the Claude chatbot, said the offering can automate a range of legal tasks, including contract reviews, non-disclosure agreement triage, compliance workflows, preparation of legal briefs and standardised responses.


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How are IT stocks placed for today’s trade?

Amid the sharp correction, international brokerage JPMorgan has struck a contrarian note, urging investors not to panic. The firm described IT services companies as the indispensable “plumbers of the tech world”, highlighting that their dividend yields have reached levels previously seen only during the global financial crisis and the COVID-19 period.

With Rs 5.7 lakh crore eroded from the sector in eight sessions and the Nifty IT index down 19%, the Wall Street major sees “deep value” opportunities emerging in beaten-down heavyweights such as Infosys and TCS.

While tools like Claude Cowork have raised concerns about large-scale disruption, JPMorgan maintains that enterprise software still needs to be implemented and managed effectively, an area where Indian IT services firms continue to play a critical role.

“Free cash flow or dividend yields scream deep value and are crossing levels prior seen during market dislocation events such as GFC and COVID,” the brokerage said, advocating a “barbell approach to buy deep value in large caps”. It has assigned overweight ratings to Infosys and TCS, along with growth-focused names Persistent Systems and Sagility.

According to its scenario analysis, valuations across the sector are now comparable to those seen during major market disruptions, suggesting limited downside even in bearish scenarios. At the same time, any incremental improvement in growth could translate into meaningful upside.

Deven Choksey, MD, DRChoksey FinServ, told ET Now that the situation may not be as adverse as it appears. “I am of the view that things are not looking as bad as it is sounding. On the contrary, for most IT companies, it is a new birth, new business, new environment in which they will probably be flourishing in coming times,” he said.

He noted that Indian IT firms have adapted well to the evolving operating landscape. Earlier, companies largely followed a time-and-cost billing structure, but the model is now shifting towards outcome-based pricing, with clients increasingly willing to pay for measurable results. This transition has been propelled by AI adoption, which enables faster delivery, cost efficiencies and improved productivity. If agility-based development defined the earlier phase, AI-led development is rapidly becoming the new standard.

As firms transition from time-linked billing to outcome-driven revenue models, several Indian IT players are expected to secure larger and more strategic deals, particularly as the business environment continues to change swiftly.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)