Trading at 21.9 times its one-year forward earnings, Infosys is now valued lower than Tata Consultancy Services Ltd. (TCS) and HCL Technologies Ltd., according to Bloomberg data.
While TCS and Infosys have historically traded at similar valuations, with one occasionally edging above the other, HCL Tech closing the gap with both marks a significant shift. At its peak in December 2021, Infosys commanded a forward price-to-earnings (P/E) multiple of 32.1x, which has since declined 32% to its current level of 21.9x.
Shares of Infosys have fallen over 21% from their December high of ₹2,006.80, reducing its valuation premium over other large IT companies. While Tata Consultancy Services, the largest IT firm, trades at 23.2 times its one-year forward earnings, HCL Tech is valued at 22x, and Wipro at 20x.
Lately, software stocks have faced significant pressure due to concerns over a deteriorating revenue outlook and a potential slowdown in discretionary tech spending. Since the beginning of the year, Infosys shares have fallen 16.2%, while TCS and HCL Technologies have declined 15% and 20%, respectively. The Nifty IT Index, one of the worst-performing sectoral indices, has dropped 21% over the same period.
However, despite the recent correction, only the shares of TCS have fallen below their historical averages while both Infosys and HCL Technologies are still trade above their 10-year averages.
Earlier this week, Morgan Stanley downgraded Infosys to ‘equal weight’ from ‘overweight,’ citing concerns over slowing growth. This marks the first downgrade in at least four years, during which the brokerage consistently maintained an overweight rating. It also slashed the target price from ₹2,150 to ₹1,740, anticipating a slower recovery and prolonged moderate growth through financial year 2027.
Also read: Infosys gets first Morgan Stanley downgrade in four years; ADRs extend decline
With a free-float market capitalisation of ₹5.7 lakh crore, Infosys has a 6.1% weightage on the Nifty50, ranking just behind HDFC Bank, Reliance Industries, and ICICI Bank. In comparison, TCS has a 3.6% weight on the benchmark index.
