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JPMorgan's top overweight in IT sector is Infosys thanks to growth, Tech Mahindra for 5G cycle and margin expansion, Mphasis and Persistant Systems (PSYS) thanks to more defensive industry exposure and stronger growth outlook.

Analysts at the global brokerage believe Infosys’ margin reset is early and calls out sector-wide factors giving it bandwidth to invest and maintain sector-leading growth. “We would Buy the IT stock on weakness for its structural strengths and see limited earnings risk from this level given its guidance track record. It stays the sector bellwether and the best way to play the current tech spending super-cycle, in our view," the note stated.

On the other hand, JPM expects Tech Mahindra to grow 13% organic constant currency (CC) in FY23 – higher than Wipro (11.4%) and just below HCL Tech (13.2%), as attractively priced while valuations are undemanding.

For Mphasis, the brokerage house expects it to be the fastest growing mid-cap IT name whose overall growth will be higher than peers as its headwind from DXC declines sharply. Mphasis’ industry exposure with dominant presence in BFSI makes it more defensive in a rising rates environment.

It remains overweight as Persistent Systems' end verticals are the most defensive which can help sustain higher growth even in a macro slowdown.

“While bottom-up commentary from Services, Software and SaaS names have remained very positive, macro indicators on Software GDP, US GDP, CEO confidence, and US PMIs have all turned negative," JPMorgan added in its note.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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