Infosys’ disappointing Q4 numbers single-handedly caused the benchmark indices to fall sharply on Monday. The stock fell 9.4% on both the indices and contributed 80% and 88% to the fall in the Sensex and Nifty, respectively. The fall wiped out Rs 54,184 crore from its market valuation pushing it down to Rs 5.22 trillion.
Down more than 200 points in pre-open trade, the benchmark Sensex shed 520.25 points or 0.86% in Monday’s session to close at 59,910.75, after reaching an intra-day low of 59,442.47.
India’s second-largest IT firm had last week reported a 7.8% and 16% year-on-year rise in its Q4 consolidated net profit and revenue to Rs 6,128 crore and Rs 37,441 crore, respectively. The numbers were, however, significantly below Street estimates.
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Further, the IT giant’s FY24 guidance of 4-7% growth in revenue in constant currency terms, and 20-22% growth in margin, stumped the Street.
The stock hit its 52-week low of Rs 1,185.30 on the NSE, before closing at Rs 1,259. On the BSE, it settled at Rs 1,258.10. Last week, American Depository Receipts (ADRs) of Infosys had slid 9.78% on the NYSE on Thursday, and a further 1.43% on Friday. On Monday, it was trading largely flat at around $15.14, down 0.30% at the time of going to press.
“For Infosys, the Q4 numbers were the immediate trigger. But what weighed on the stock were challenges on the client aspect. Delay in decision making by overseas clients, coupled with cancellation of projects and deferrals,” said Apurva Prasad, Institutional Analyst at HDFC Securities.
At the NSE, the company holds a 6.68% weight in the index, the fourth largest.
Sectorally, the NSE IT index led the fall, closing down 4.71% at 27,008.50. It slumped to an intra-day low of 26,184.45 — down 7.62% from its previous close. Besides Infosys, Mindtree and Tech Mahindra were other big losers, shedding 7% and 5% respectively. TCS fell the least, down 1.56% to close at Rs 3,139.
On the BSE, the BSE Info Tech index was down 4.77%, while the BSE Teck shed 4.56%.
“A slowdown across the globe has been an overhang, while high attrition rates continue to ail the sector. Despite the rupee having depreciated, strength is lacking in the dollar index vis-a-vis other currencies, which has led to a cross-currency impact,” said Chandan Taparia, head (Technical & Derivatives Research) at Motilal Oswal.
He pointed out that Infosys’ Q4 results have put pressure on the whole sector, and underperformance in the IT counter could continue.
A report by BNP Paribas India said Infosys’ Q4 revenue missed estimates on account of unplanned client ramp-downs across sectors, which led to low volumes. Revenue took a one-time hit from project cancellations and client-specific issues, it added.
Considering the heightened uncertainty at the company, the bank believes TCS is better positioned to benefit from the shift in customers’ focus to cost-optimisation deals. Interestingly, the Nasdaq had gained 1.99% on Thursday, but had lost up to 1.15% intra-day on Friday, before recovering to end 0.35% down.
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Prasad added that while there was a strong co-relation between the Indian IT sector and its US counterpart, there has been a disconnect since the beginning of the year.
“Which direction the US tech stocks take depends a lot on their larger macro-economic factors and local aspects. For Indian IT firms, developments like SVB and UBS’ acquisition of Credit Suisse weighs on sentiment, given that the overseas BFSI sector comprises a bulk of their clientele,” he added.