Domestic information technology (IT) stocks are facing intense selling pressure across the sector as caution persists over the advancing artificial intelligence (AI) models, which may disrupt traditional tech models, prompting a broad sector sell-off.

The selloff was visible on Thursday as well. Shares of major IT bellwethers tumbled to fresh lows on the BSE. Infosys Ltd shares hit a 52-week low of Rs 1,092.20, while Tata Consultancy Services Ltd (TCS) down to a record low of Rs 2,210 per share. 

Meanwhile, HCL Technologies Ltd plunged to a low of Rs 1,110 today, and LTM Ltd shares mirrored the broader trend, sinking to a 52-week low of Rs 3,911. At last check, the broader BSE IT index was down 2.36% to 26,539.93.

What PL Capital says on IT sector

Amid this, brokerage firm PL Capital maintains an ‘Overweight’ rating on the broader IT sector. In its latest sector update dated May 14, the brokerage pointed out that the fundamental nature of enterprise IT engagement is changing rapidly. Rather than relying on standard data crunching, clients now demand deep, goal-oriented solutions. 

"Fragmented or siloed projects are transforming into a strategic program to achieve a company-wide outcome", PL Capital said.  

The brokerage observed that basic data engineering is increasingly seen as ‘commoditized in nature’, noting “while value delivery translates through high-end complex activities: data science, decision architecture and AI governance.”

“The industry is doubling down on high-end complex activities that involve decision accountability, risk tiering, AI governance and other activities simplifying the decision-making process,” the brokerage said.

Target prices & ratings

Despite the current market rout pushing shares to 52-week lows, PL Capital remains optimistic on select tech giants. For Infosys, the brokerage maintains a ‘Buy’ rating, setting a target price of Rs 1,570 per share. Tata Consultancy Services (TCS) also has a ‘Buy’ call with a target price of Rs 3,450.  

However, the brokerage adopts a more cautious stance on other major players within the space. PL Capital gave a ‘Hold’ rating on LTM, issuing a target price of Rs 4,560. Meanwhile, HCL Technologies has been slapped with a ‘Reduce’ rating on the stock, pegging its target price at Rs 1,300.