Shares of Indian IT giant Infosys plunged close to 15% on Monday and dragged down other companies in the tech sector.
The company’s weak revenue outlook has raised concern about demand for Indian IT services amid fears about the recent banking turmoil and a looming global recession.
Infosys’ outlook last week followed a disappointing quarterly report from larger rival Tata Consultancy Services, highlighting worries for the sector which earns more than 25% of its revenue from just the US and European banking, financial, services and insurance sector.
The collapse of two mid-sized US lenders in March had left the financial ecosystem shaken and drove a robust government effort to reassure depositors and backstop the system.
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Project cancellations, delays
“Some of the macro challenges especially around banking, financial services and insurance (BFSI) has become bigger and that does mean project cancellations or delays in the deal decision cycle,” Apurva Prasad, vice president of institutional research at HDFC Securities, said.
Prasad said he was expecting a sequential decline for companies like HCLTech, Wipro and Tech Mahindra on constant currency basis.
Infosys, India’s second-largest IT services firm, on Thursday, said it expects revenue growth of 4%-7% on a constant currency basis for the fiscal year ending March 2024.
That was well below analysts’ expectations of 10.7% growth, as clients cancelled some projects and deferred spending on growing fears of a recession.
The previous slowest annual growth was a 5.8% increase in fiscal 2018.
Infosys fell as much as 14.7% to 1,185.3 rupees on Monday in its biggest intraday percentage drop since October 2019, before recovering about a third of that.
The Nifty IT index dropped as much as 7.6%.
Bengaluru-based Infosys’ net profit of 61.28 billion rupees ($748.21 million) in the January-March quarter also missed analysts’ expectations of 66.24 billion rupees, according to Refinitiv IBES.
Smaller rival HCLTech is due to report results later this week, while Wipro is expected next week.
- Reuters with additional editing by Jim Pollard
NOTE: The subhead on this report was updated on April 17, 2023.
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