The outperformance was as investors increased their positioning in the sector after two years of declining earnings in hopes that the IT sector has bottomed out and is on the cusp of recovery.
Global brokerage firm JP Morgan has upgraded LTIMindtree to ‘Overweight’, raising the price target to $6,900 and upgraded Mphasis to ‘Overweight’ with a price target of $3,400 per share.
The brokerage sees these companies as potential beneficiaries of a recovery in the banking and financial services (BFS) sector, which has shown strong performance and positive trends over the past three months, especially for US BFS companies.
A possible rate cut from the Federal Reserve could boost the US BFS mortgage market, which has also been under pressure. This improvement could lead to an increase in discretionary technology spending over the next 12 to 18 months.
LTIMindtree and Mphasis are well positioned to benefit from this recovery, given their significant exposure to the BFSI segment, at 35% and 59% respectively, among the highest in the US BFS market.
BFSI is the largest revenue contributor to most of these IT companies. Some companies have up to 60% exposure to the BFSI segment.
LTIMindtree Ltd. shares were trading 2.27% higher on $6,253.05, while Mphasis shares rose 1.68% in $2,894.45.
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