JPMorgan India expects further weakness in IT stocks, earnings downgrade

Indian equity benchmarks BSE Sensex and NSE Nifty50 opened flat on the last trading day of the week before slipping in the red. Losses in IT shares dragged the indices lower. Wipro is to report its third-quarter numbers later today. Infosys and HCL Tech reported their quarterly numbers on Thursday.

Sanjay Mookim, Strategist and Head of India Equity Research at JPMorgan India appeared on CNBC-TV18 to discuss the state of the Indian stock market and IT space. According to Mookim, he sees further weakness for IT stocks as there could be earnings downgrades going forward. He also mentioned that he doesn't see any earnings upgrades in the medium term.

“Neither the revision cycle nor the valuations are in favour for us from an IT pack. And therefore, we stay with our negative view on the space for a while,” he said.

Mookim highlighted that the reopening momentum in China will continue and the lack of interest in India may persist until China completely normalizes. He also noted that he expects global central banks to turn dovish in the second half of 2023.

Despite the negative outlook for IT stocks, Mookim expressed optimism about light manufacturing companies in India, such as auto ancillaries. He believes that these companies have the potential to do well in the current market environment.

Overall, Mookim's comments provide a mixed outlook for the Indian stock market. While there are some challenges ahead for certain sectors, such as IT, there are also opportunities for growth in other areas, such as light manufacturing. Investors will need to stay vigilant and monitor the market closely to make informed investment decisions.

“We can see in trade data that India’s light manufacturing industries, which could include auto ancillaries and many other things are structurally gaining market share over time,” he said.

For more details, watch the accompanying video