(Reuters] – Rising inflation, supply chain issues, and the impact of the Ukraine war will stop the India IT Services industry’s growth boom during the pandemic. J.P.Morgan analysts announced on Thursday that they had downgraded the sector from “underweight” to “underweight”.

Software services that helped businesses adapt to the pandemic-era practice of remote shopping and online work are facing slowing demand as workers return to office and Russia’s conflict affects European client spending. The sector is worth $194 million.

JPM stated that “we see peak revenue growth behind and EBIT margins tending down from inflation mean reversion,”

“While most Services, Software, and SaaS companies YTD have a positive outlook, and tech spending cycles remain buoyant structurally, there are still downside risks to our current earnings assumptions.

According to the brokerage, the slowdown could worsen by 2023 due to possible declines in orders in the US key market. This is partly because of the weakening economy.

Tata Consultancy Services Ltd., India’s largest IT exporter, was rated “underweight” instead of “neutral”. However, it remained “overweight” on Infosys (NYSE)

JPM noted that industry margins may be narrowing due to the talent war, but Infosys’ margin reset has been early, and it gives it flexibility to invest and continue growth.

Infosys was the second-largest player in this industry. They reported a 3.3% decrease in operating margins during the January-March quarter.