Tech giants TCS, Wipro, Infosys see decline following Accenture’s caution about challenging market conditions
On Friday, the Indian IT sector faced a challenging day as all major stocks traded in the red following Accenture’s guidance after the release of their earnings report. This negative guidance from Accenture further exacerbated the ongoing correction zone that the IT sector has been experiencing since its peak in December. This led to significant declines across the board for major companies in the sector. Notable losers included L&T Technology Services, which experienced the steepest drop of 3.83%, trading at Rs 4,476.25 apiece, and LTIMindtree, which saw a substantial decline of 3.65%, trading at Rs 4,259.8 apiece. Persistent Systems and Infosys also witnessed notable declines of 3.19% and 3.21%, respectively. Additionally, other major IT stocks such as Wipro, Mphasis, and Coforge recorded losses, with Wipro down by 2.91% to Rs 260.2 apiece, Mphasis falling by 2.84% to Rs 2,240.4 apiece, and Coforge by 2.75% to Rs 7,370.1 apiece.
The earnings report released by Accenture painted a cautious outlook for the IT sector. Despite the company increasing its lower-end forecast for earnings per share (EPS) and revenue for fiscal 2025, the outlook remains guarded. Accenture now expects its EPS to be in the range of $12.55 to $12.79 per share, slightly up from its previous expectations. Revenue is anticipated to rise by 5-7%, compared to the earlier forecast of 4-7%. However, the company’s operating margin forecast has tightened, and its generative AI-related new bookings for the second quarter stood at $1.4 billion. This cautious outlook from Accenture has led to a mixed response from brokerages, with some flagging potential trouble ahead. CLSA remains optimistic based on stable pricing and budgets, while HSBC and Citi have adopted a more cautious stance. HSBC highlighted a possible pause in flow business, particularly in retail, and noted that it will be difficult for the IT sector to outperform the market in 2025. Citi echoed similar concerns, citing heightened uncertainty in the global economy and geopolitics.
Nomura also expressed caution, noting that while Indian IT companies do not have exposure to US federal government contracts, there is a risk of clients turning cautious on IT spending due to rising macroeconomic uncertainty in the near term. The brokerage believes that growth for Indian IT companies is likely to bottom out in the financial year 2025. Overall, the guidance provided by Accenture has sent ripple effects throughout the Indian IT sector, leading to a day of significant declines for major companies in the industry. It remains to be seen how the sector will navigate through these challenging times and whether there will be any signs of recovery in the near future.
