Macquarie downgrades IT stocks

The Australian and investment bank has also removed the country’s largest software exporter Tata Consultancy Services from the top-10 investment ideas,and replaced it with ICICI Bank.

“IT had been a great place to hide given the rupee depreciation,but serious doubts about the demand scenario,especially from the BFSI (banking and financial services) segment,have emerged,” Macquarie explained.

Both TCS and its closest rival Infosys have been relegated to “underweight” while MindTree has been removed from the portfolio of tracked companies,the note said.

On Infosys,Macquarie feels the Bangalore-based conservative company will further revise its growth forecast to around 6 percent from 8-10 percent for this fiscal.

The move is a bit surprising considering that the better-run IT companies,which leveraged on offering low-cost solutions was once considered a sunrise sector.

Given the likely pick-up in the infrastructure sector and as the possibilities of a rate cut grow,Macquarie said it is going overweight on industrial sector like BHEL.

It said it has reduced the financials sector also to being underweight as it feels that restructuring of assets is likely to continue and may peak only after six months.

It has also removed mortgage major HDFC from its model portfolio and has increased weight on HDFC Bank and ICICI Bank.

On the broader market,Macquarie feels that it should enter a phase of consolidation now,after a gaining about 7-8 percent in June.

“We are not expecting an exceptionally strong start to the results season and most companies will have currency translation losses to deal with. Wait for dips to buy,” it advised the investor class.