Global brokerage firm Jefferies expects Indian IT companies to benefit from the recent 1-3% depreciation of the Indian Rupee against the US Dollar, Euro, and British Pound. A weaker rupee boosts revenue potential for IT firms with greater exposure to these currencies and a strong offshore workforce.
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Among large-cap IT stocks, Jefferies remains constructive on Infosys, LTIMindtree, and TCS, while Coforge, Sagility, and Mphasis are preferred picks in the mid-cap space. LTIM, Wipro, Sagility, and Coforge are best positioned, given their substantial USD/EUR/GBP revenue exposure and a higher proportion of offshore employees.
Jefferies has revised earnings estimates for IT firms upward by 2-5% to account for recent currency movements. However, the brokerage has lowered target price-to-earnings (PE) multiples by up to 15%, citing rising US bond yields and the recent PE derating in the Nifty index. Despite these valuation adjustments, Jefferies remains optimistic about the IT sector.
