IT Stocks Pare Losses After Early Crash On Accenture's Grim Outlook

Infosys led the fall, followed by LTIMindtree, Persistent Systems and HCL Technologies.

<div class="paragraphs"><p>(Source: Envato)</p></div>
(Source: Envato)

Shares of Indian information-technology companies recovered following a crash during early trade on Friday after Accenture Plc lowered its revenue guidance for the fiscal ending August 2024.

Piling on the troubles for India's $250-billion IT services industry, Accenture sees its financial year 2024 growth at 1–3% vs 2–5% as previously estimated. The tech major estimated its operating margin at 14.8% versus 14.8–15% earlier.

Accenture recorded a flat second quarter, even as dealmaking rose to the second highest ever in the three months ended February 2024.

Following the grim outlook, investors reacted sharply, with the Nifty IT falling as much as 3.68% in early trade, the largest intraday fall since July 21, 2023. It later pared losses to trade 1.89% lower as of 12:46 p.m. Investors saw a wealth erosion of around Rs 1 lakh crore during the day.

Infosys Ltd. led the fall with a decline of 2.39%, followed by LTIMindtree Ltd. at over 2.2%. Persistent Systems Ltd. and HCL Technologies Ltd. were down over 2%.

Still Cautious Of IT Sector, Say Analysts

Clients' budgets reveal further tightening of the tech budget over the last quarter, particularly on small deals, the company's management said. This was negative for the IT sector as discretionary spends remain under pressure, according to Jefferies.

IT is likely to remain under pressure in view of the poor guidance from Accenture. Any sharp intraday up moves may face selling from the foreign institutional investors since the US bond yields continue to remain high, according to VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Discretionary demand is unlikely to recover meaningfully in the first half of the next fiscal for the Indian IT sector, Nomura Research said, maintaining a cautious stance. "While revenue growth for large caps should improve in FY25, we expect it to be driven by cost take-out deals."

Accenture’s Q2 FY24 Commentary Points To Continued Pressure On Demand: Motilal Oswal