A host of IT counters, including some bluechip names, dropped sharply lower on Monday after the disappointing performance by Infosys in the March 2023 quarter.
Sell-off in the shares of Infosys led to collateral damage in other IT counters as well. A host of IT counters, including some blue-chip names, dropped sharply lower on Monday after the disappointing performance by Infosys in the March 2023 quarter.
Infosys, which opened at a lower circuit of 10 per cent for the first time after March 23, 2020, extended its weakness, down 12 per cent, during the trading session. Another Nifty50 constituent, Tech Mahindra, tumbled 8 per cent after global brokerage firm Citi double downgraded the stock to 'sell' from 'neutral' and slashed its target price to Rs 955 from Rs 1,100 per share.
Citi cited increased risks to growth in the communications vertical, which accounts for approximately 40 per cent of the company’s revenue; recent data points and commentary have raised concerns, as key reasons to downgrade Tech Mahindra. There are near-term challenges and a negative catalyst watch is already in place, it added.
Among other losers, LTIMindTree and Persistent Systems plunged 10 per cent each to Rs 4181 and Rs 3959.25, respectively. Coforge tanked 7 per cent to Rs 3753.85. Mphasis and HCL Technologies declined up to 4-6 per cent each.
For Q1CY23, overall ACV (annual contract value of ordering activity) came in at $24.1 billion, up 0.8 per cent QoQ and down 7.7 per cent YoY, wherein strength in managed services was offset by weakness in As-A-Services ACV, said ICIC Securities in its report citing an ISG (Information Services Group) survey.
"For CY23, ISG has lowered its as-a-services ACV growth forecast from 17 per cent to 15 per cent due to slowdown in discretionary spending in the BFSI vertical. It expects the decline in booking to continue in Q2CY23 followed by a sharp pick up in H2CY23. It, however, maintained its managed services growth outlook at 5%, given its high focus on the cost optimization agenda of clients," it said.
Another brokerage firm, B&K Securities, said that there are galore headwinds for the IT sector including softening of growth, pressure on margins, macro uncertainty and muted deal flow will make Q4FY23 a difficult quarter for the IT companies.
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