IT Sector earnings review: Axis lists top hits and misses in Q2; picks 3 top stocks

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Read here: Q2 Results: Godrej Consumer, ITC, Dabur, Tata Consumer among top analyst picks After strong revenue growth momentum in FY22 and FY23, Axis believes IT services may face challenges on demand and margin fronts on account of the economic slowdown and macroeconomic uncertainties. It has a skeptical near-term outlook for North America (40 percent of revenue). It further pointed out that deal wins remained resilient even during the difficult times, which gives us confidence that automation spending will rebound strongly in two to three quarters.

Demand in industries such as retail and manufacturing remains strong and is expected to regain momentum in the near future. Also, the demand for newer technology services such as generative AI, machine learning, IoT, and cloud transformations remains stable and is likely to recover more quickly as certain macroeconomic challenges subside, it noted. Read Here: Five key trends in Q2 results revealed: Nuvama The brokerage continues to believe that most IT services companies will regain momentum in the second half of the year as deal wins remain resilient and supply-side challenges ease.

Many companies are becoming increasingly system-oriented and are unable to escape the costs of automation, thereby creating strong long-term demand, added Axis. Post the September quarter earnings, the brokerage has listed its top 3 ideas from the IT services space - Coforge, Persistent Systems, and KPIT Technologies. Coforge: The brokerage has a ‘buy’ call on the stock with a target price of ₹5,655, indicating a muted 0.5 percent upside potential.