The Nifty IT index stood out as the sole outlier in a sea of red, buoyed by the sharp outperformance of LTIMindtree and Mphasis stock prices. The counters rallied sharply after international brokerage JP Morgan upgraded the counters to 'outperform'.
JP Morgan upgraded LTIMindtree to an 'overweight' rating, with a target price of Rs 6,900 per share. This indicates an upside of 13 percent from the previous closing price of Rs 6,114.1.
Mphasis bagged a similar upgrade, with a target price of Rs 3,400 per share, implying a 19 percent upside.
At 12.15 pm, LTIMindtree shares were quoting Rs 6,217, up 1.7 percent on the NSE. Mphasis stock price was trading at Rs 2,872, higher by 0.9 percent compared to the previous session's close.
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According to the brokerage, these names are a good proxy play to the banking and financial services in the US and other geographies.
A rate cut from the US Federal Reserve could be a massive benefit for mortgages and home-loans in the US, further adding to bullishness. If the sector continues to improve, it could lead to heavy tech spends over the next 12-18 months.
LTIMindtree has a 35 percent exposure to the BFSI segment, while Mphasis has a 59 percent exposure. Within that, these two names have the highest exposure to the US banking industry.
Last month, Motilal Oswal Securities had reiterated its buy call on LTMindtree, as the brokerage bets a recovery in America's BFSI sector will be a key factor driving future growth.
After the Fed rate cut, there is anticipation that more ERP modernization projects could take off the ground, which in turn will help LTIMindtree. The MOSL note said it sees US clients resuming ‘high-priority’ projects in this vertical.
"Initial investments (by US clients) will be centered on data, cloud, and digital infrastructure, and LTIMindtree is well-placed to leverage this emerging opportunity," said the MOSL note.
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