Wipro gains on double upgrade from CLSA; check revised target, rationale

Wipro share price has risen 11 percent so far this year, narrowly beating Nifty's returns of 10 percent during this period.

A double upgrade by CLSA sent shares of Wipro higher by as much as 4 percent on July 1, making it the top Sensex gainer, with the rating revised from 'Underperform' to 'Outperform' and the target price raised to Rs 607 from Rs 431 per share.

The revised price target implies a potential upside of nearly 41 percent from the June 28 closing level.

The brokerage firm anticipates no further adjustments to Wipro's FY25 guidance and said it has noted a stabilization in discretionary demand, which is helping the outlook. CLSA expects Wipro to provide Q2 constant currency revenue growth guidance in the range of 0-2 percent.

In an exchange filing last month, Wipro had said that a leading US communication services provider has awarded a contract to the company for managed services for some products and industry-specific solutions. The $500 million deal is expected to be spread over a period of five years.

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Wipro's announcement of a $500 million deal this quarter has also been received positively by CLSA. Another brokerage Morgan Stanley had also said that the mega US deal can be a positive, especially given the tight discretionary spending environment.

Aside of Wipro, other IT stocks like Tech Mahindra, LTIMindtree and Tata Consultancy Services (TCS) too were trading higher by up to 2 percent, helping the Nifty IT index.

Experts point to renewed foreign inflows and optimism surrounding potential US Fed rate cuts as key drivers behind the current rally in IT shares.

According to Kranthi Bathini, director of equity strategy at WealthMills Securities, "Valuations of IT stocks appear very attractive from a long-term perspective." Given that Indian IT firms derive a substantial portion of their revenue from US clients, they are particularly sensitive to changes to the US Fed Funds rates.