Lowering of its revenue forecast by Infosys Technologies on Thursday triggered a sell-off in technology stocks, which sparked a sharp fall in the benchmark indices.
The country’s second-largest software firm on Thursday posted lower-than-expected profits and also lowered its full-year expectation in dollar terms for 2012-13.
Shocked by the unprecedented cut in annual sales forecast, the Infosys counter saw major selling pressure and the stock fell as much as 10 per cent during the day.
The stock closed eight per cent lower at Rs 2,265.25. Wipro, the third-biggest information technology (IT) firm, dropped four per cent and Tata Consultancy Services, which announced its numbers after market closing, fell 1.8 per cent.
|BLOW BY BLOW
IT stocks took a beating on the bourses as Infy disappointed (BSE price in Rs)
||Jul 11, ‘12
||Jul 12, ‘12
|Core Education & Tech
|BSE IT Index
|Data compiled by BS Research Bureau
These three stocks, which account for 14 per cent of Sensex weightage, pulled the index down by 256.6 points, or 1.5 per cent to 17,232.5.
Meanwhile, the Bombay Stock Exchange (BSE) IT index fell more than five per cent.
Infosys said its revenue in dollar terms could increase just five per cent to $7.34 billion for the year ending March 2013, down from its April estimate of 8-10 per cent growth.
“Infosys reported a disappointing 1QFY13, but an even bigger disappointment was on revenue growth guidance,” said JP Morgan analysts Viju K George and Amit Sharma, in a note to their clients. “It seems Infosys has much work to do in an increasingly polarised environment. What is quite astonishing is that in six of the last seven quarters on the day of the Infosys results, the stock has responded rather steeply to performance/expectation misses,” they added. The analysts maintained their ‘neutral’ rating on Infosys stock with a March 2013 target of Rs 2,750.
“We remain worried as we think two indicators are now flashing red — order cancellations have started and billing rates have taken a tumble in the quarter,” said Barclays Capital analysts Bhuvnesh Singh and Vaibhav Dhasmana. “We also note that Infosys reduced total IT services employees by 1,092 in the quarter, clearly indicating that volumes are not expected to recover anytime soon. The key issue now is will a price war start in the sector and, hence, even other companies could start exhibiting signs of strain.”
Meanwhile, TCS posted better-than-expected Q1 profit led by a weak rupee and increased demand for outsourcing. It posted net profit of Rs 3,280 crore for the June quarter, higher than analysts’ forecast of Rs 3,050 crore.