The stock of the IT (information technology) services firm declined 2.3 percent to Rs 205 during the early trade hours on Monday.
While the stock opened marginally higher at Rs 210.35 than its previous close of Rs 209.95, it fell to as low as Rs 204.25 during the trade on the first day of the week. This is the 52-week low for the stock.
The decline in the stock comes as global brokerage firm Jefferies maintained the stock in the “underperform” category, according to a report by CNBC TV18.
In its report note titled ‘P(AI)n Not Over Yet; Stay Selective’, the brokerage also downgraded other IT majors such as Infosys, TCS, HCLTech, and LTIMindtree.
The rationale behind the downgrades has been cited as the impact of artificial intelligence (AI) technology in the IT sector. According to Jefferies, the technology will change the nature of the business of IT giants like Infosys.
Wipro is the fourth-largest IT sector company in the country, following Tata Consultancy Services, Infosys, and HCLTech.
The Jefferies note said that AI will direct these companies towards consulting and implementation, while the scope of services management will shrink.
This would increase cyclicality in the business and require companies to onboard relevant talent and operating models.
While IT stocks are up around 16 percent on a year-to-date basis, Jefferies considers the impact of AI more significant than the performance of the IT sector so far. It has pared earnings per share estimates by 1–4% and reduced the price targets by up to 33 percent.
The brokerage said that investors are going to focus on the mid- and long-term impact of AI technology on the sector going forward.
The Nifty IT index is down 14%, underperforming the Nifty 50, which indicates that efficiency gains from AI could put price pressures on core services.
Wipro reported revenue of Rs 18,016 crore and a profit of Rs 2,782 crore in the December quarter.
