- Accenture's shares dropped 17% after lowering its full-year revenue forecast for FY26
- Infosys and Wipro ADRs fell up to 8% in early US trading, signaling potential sell-off
- Accenture's softer demand outlook signals challenges for Indian IT sector recovery
The Indian information technology majors are likely to see a red start on Friday, as Accenture's earning scorecard and forward-looking guidance has raised a cloud on the prospects of the IT sector as a whole.
The American Depository Receipts of Infosys and Wipro—India's leading IT players—slumped up to 8% in early trading at the Wall Street, suggesting that a massive sell-off could be on the cards at the Dalal Street as well when the trading begins on Friday.
Accenture was the worst performer in the US stock market, as its shares cracked 19% minutes after the opening bell. At 11:51 a.m. EST (9:21 p.m. IST), the scrip was trading 17% lower at $129.5.
"If Accenture does not recover tonight, it will definitely have impact on Indian IT sector tomorrow," underlined Kranthi Bathini, Director of Equity Strategy at WealthMills Securities.
Accenture's softer revenue forecast has disappointed the Street, despite profitability remaining strong. The Julie Sweet-led company has cut its full-year revenue forecast and expects a turnover of between $17.75 billion to $18.4 billion Q4FY26, falling short of Bloomberg analysts' consensus estimates of $18.47 billion.
ALSO READ: Accenture Trims Revenue Forecast; New Bookings Slip To $19.3 Billion
Furthermore, Accenture expects its revenue in dollar terms to grow between 3% to 4%, down from its earlier forecast of 3% to 5%.
The guidance cut signals a softer demand outlook for the Indian IT sector. The consulting demand for Accenture remains weak and discretionary spending yet to recover signalling hurdles for IT giants back home.
"Accenture's earnings are a cautious read-through for Indian IT. The issue is not only the headline growth number, but the mix of demand. Consulting remains soft, bookings have moderated, and clients appear to be prioritising cost takeout, efficiency and managed services over large discretionary transformation programmes," Harshal Dasani, Business Head at INVAsset PMS pointed out.
He explained that the moderation in demand matters for India because the recovery in IT services still depends on the return of discretionary tech spending, not just on large deal announcements.
What This Means For TCS, Wipro, HCLTech And Others?
The results might have caused a stir in the IT services and software space, but the impact is not going to be uniform for all D-Street tech players.
"Large-cap IT names such as TCS and Infosys may see the market question the pace of demand recovery in banking, retail and communications, where decision-making has stayed slow. Wipro and Tech Mahindra could remain more sensitive to execution commentary because both are still rebuilding growth credibility," highlighted Dasani.
ALSO READ: Accenture In Freefall: Stock's 12-Month Decline At 50% After Q3 Triggers Fresh Sell-Off
The expert added that among the big names, HCLTech may be relatively better placed if managed services and infrastructure-led demand remain stronger, but even there, pricing and margin protection will matter.
So far as mid-tier firms such as LTIMindtree, Persistent Systems and Coforge are concerned, revenue from AI, cloud, engineering or platform-led work may still attract investor interest, "but valuations leave little margin for disappointment," remarked Dasani.
Additional Headwinds And Possible Upside
On top of Accenture's performance, another factor weighing on the Indian IT sector for short-to-medium term is the Federal Reserve's hawkish commentary, according to Bathini.
The US Central bank kept benchmark lending rates on hold, in view of the uptick in inflation driven by global headwinds. The Federal Open Market Committee (FOMC), led by new Chair Kevin Warsh, decided to keep rates steady in the 3.5%-3.75% target range.
Additionally, the committee was split on the prospect of a rate hike in the current calendar year going forward, with nine out of 18 expecting at least one rate hike in 2026.
The analyst also highlighted that America's economic growth prospects are going to determine how the information technology sector behaves back home.
However, further correction in major IT players like TCS, Infosys, and Wipro may bee seen as a good opportunity to buy them in the long term, as per the analyst.
"By and large the Indian IT companies are decent in terms of trading in the long term averages," Bathini stated, adding that Infosys' collaboration with AI companies such as Valmet and OpenAI may lift market sentiment.
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