Infosys shares decline almost 4% after Morgan Stanley downgrades stock, cuts target price

Infosys shares fell nearly 4 percent on March 12 after Morgan Stanley downgraded its rating on the stock to ‘equal-weight’ from ‘overweight.’ The brokerage cited concerns over slowing growth and valuation pressures, leading it to slash its target price for Infosys to ₹1,740 from ₹2,150. This revision implies a limited upside potential of just 10 percent from the stock’s intraday low.

"We see downside risks emerging for both the revenue growth of Indian IT services and valuation multiples," Morgan Stanley said in its note.

Morgan Stanley’s Outlook on Indian IT

Morgan Stanley expressed concerns about the broader Indian IT services sector, noting emerging downside risks to revenue growth and valuation multiples. The brokerage highlighted that a combination of lower real and nominal GDP growth in the US, along with an ongoing technology transition cycle, is creating headwinds for Indian IT companies. Despite a weakening rupee, which typically benefits IT exporters, the sector has struggled amid fears of a potential US economic slowdown and trade policy uncertainties. The Nifty IT index has been one of the worst-performing sectors in 2025, declining by 14 percent year-to-date.

Morgan Stanley also suggested that valuation multiples for certain stocks in the sector could become more polarized. While currency movements provide some support for profit margins, the brokerage believes that valuation multiples still have room for further downside.

While Morgan Stanley has turned cautious on Infosys, not all analysts share the bearish outlook. Last week, CLSA upgraded Infosys to ‘accumulate’ from ‘hold,’ setting a 12-month target price of ₹1,978.

Stock Price Trend

Infosys shares fell as much as 3.7 percent to an intraday low of ₹1,578.35 on March 12. The stock remains more than 21 percent below its 52-week high of ₹2,006.80, which was recorded in December 2024. However, it has gained 16 percent from its 52-week low of ₹1,359.10, registered in June 2024.

Over the past year, Infosys has added 4 percent, but recent months have been challenging. In March alone, the stock has dropped nearly 6 percent, following a sharp 10 percent decline in February.

Infosys Q3 FY25 Performance

Infosys posted an 11.46 percent rise in consolidated net profit, reaching ₹6,806 crore for Q3 FY25. Revenue from operations stood at ₹41,764 crore, marking a 7.58 percent increase from ₹38,821 crore in the same quarter last year. The IT giant also raised its revenue guidance, supported by growth in the financial services and manufacturing segments.

Morgan Stanley’s Preferences in IT Sector

In its latest sector update, Morgan Stanley stated a preference for Tata Consultancy Services (TCS) over Infosys, Tech Mahindra over HCL Technologies, and Coforge over Mphasis.

The brokerage maintained an ‘overweight’ rating on Coforge but revised its price target down from ₹11,500 to ₹9,400. Similarly, while keeping an ‘overweight’ stance on TCS, it lowered the target price from ₹4,660 to ₹3,950.

HCL Technologies and Tech Mahindra received an ‘equal-weight’ rating, with price targets cut to ₹1,600 from ₹1,970 and ₹1,550 from ₹1,750, respectively.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.