The Indian IT sector is experiencing a significant downturn, with major stocks registering losses on Friday. The decline follows disappointing guidance from Accenture, which has dampened investor confidence. As the sector has been in a correction phase since its peak in December, today’s sell-off highlights ongoing concerns about profitability and growth within the industry.
Major IT Stocks Experience Sharp Declines
On this challenging day for the Indian IT landscape, L&T Technology Services took the hardest hit, plummeting 3.83% to ₹4,476.25 per share. Similarly, LTIMindtree saw a notable drop of 3.65%, trading at ₹4,259.80. Other key players like Persistent Systems and Infosys also faced setbacks, with declines of 3.19% and 3.21%, respectively.
- Wipro decreased by 2.91% to ₹260.20
- Mphasis fell 2.84% to ₹2,240.40
- Coforge dropped 2.75% to ₹7,370.10
Accenture’s Earnings Report Sends Shockwaves
Investor sentiment was heavily influenced by Accenture’s recent earnings report, which revealed a cautious outlook for the IT sector. While the company raised its lower-end forecast for earnings per share (EPS) to a range of $12.55 to $12.79, and projected revenue growth of 5-7%, the tightened forecast on operating margins has raised eyebrows. Notably, Accenture reported $1.4 billion in new bookings related to generative AI for the second quarter.
Mixed Reactions from Brokerages
The response from brokerages regarding the IT sector has been varied. CLSA maintains an optimistic view, citing stable pricing and budgets, while HSBC and Citi express caution. HSBC warns of a potential slowdown in business flows, particularly in the retail sector, suggesting challenges for IT stocks to outperform the market in 2025. Citi echoes these sentiments, highlighting increased uncertainty due to global economic conditions and geopolitical tensions.
Caution Ahead for Indian IT Companies
Nomura has also raised concerns, noting that while Indian IT firms lack exposure to U.S. federal government contracts, there is an increasing risk of clients becoming hesitant about IT expenditures amid rising macroeconomic uncertainty. The brokerage predicts that growth for Indian IT firms may hit a low point in the 2025 financial year.
In summary, the Indian IT sector is navigating a turbulent landscape, with significant declines in stock prices driven by cautious outlooks and mixed brokerage opinions. Investors are advised to keep a close watch on market developments as the situation evolves.
