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BENGALURU (Reuters) -Goldman Sachs downgraded top Indian information technology service providers Tata Consultancy Services and Infosys to “sell,” from “buy,” citing a potential slowdown in dollar revenue growth in the face of impending macroeconomic stress.

“We believe a slowdown in discretionary IT services spend around the growth and transformation agenda will be quite material and something not yet co*pletely reflected in the street’s double-digit revenue growth forecast for the industry for FY24,” Goldman analysts said in a note.

Goldman said it remains “more sanguine” on the EBIT margin forecasts than on revenue of Indian IT co*panies, given multiple levers such as higher employee utilisation, controls on variable pay and annual wage hikes.

India’s top IT services firms have started freezing or cutting staff bonuses, worried that tightening budgets at U.S. and European clients who are bracing for a recession will sharply hit their own profit as the pandemic-led boom fades out.

The IT firms made a windfall when pandemic struck the world couple of years back as several global corporations poured millions of dollars to rev up their digital infrastructure.

However, several top tier co*panies missed profit estimates in the April-June quarter due to higher costs.

Goldman upgraded Wipro to “buy” from “sell,” citing attractive valuations and a recent pickup in the co*pany’s order book.

The Nifty IT index was down 3.1% on Wednesday as a surprise increase in U.S. inflation stoked fears of aggressive rate hikes by the Federal Reserve.

The IT index has been one of the worst hit sectors, falling over 27% so far this year, underperforming benchmark Nifty 50 index, which is up 4%.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Dhanya Ann Thoppil)