Shares of Infosys Technologies plunged nearly 13 per cent on Friday, the most since May 2009, after India's second-largest software services exporter disappointed investors with a lower-than-expected revenue growth outlook for 2012-13.
Tepid guidance from Bangalore-based Infosys hurt shares of other major information technology (IT) stocks as well as key stock market indices.
Infosys shares slumped 12.61 per cent, or Rs 346.75, to close at Rs 2,403.3 on the Bombay Stock Exchange (BSE). Other IT majors that fell on Friday included TCS down 5.47 per cent to Rs 1,069.55, Wipro down 4.1 per cent to Rs 420.95 and HCL Technologies declined 3.2 per cent to Rs 478.1. The BSE IT index lost 8.76 per cent, the highest among all sectoral indices.
Infosys said it expected its dollar revenues to grow by 8-10 per cent for the year ending March 31, 2013, to $7.55 billion-$7.69 billion, lower than expectations of 10-15 per cent forecast by most analysts.
“The results and the guidance will likely re-fuel fresh debate on not just “structural issues” with the company (Infosys) but also question the demand for IT services going into next year,” said Bhuvnesh Singh and Vaibhav Dhasmana, analysts at Barclays Capital, in a note to clients post-announcement of Infosys Q4 results. "The company's performance is volatile and management's ability to predict this performance has become less accurate in the face of poor visibility in the macro environment. We expect this to continue for some time and hence continued pressure on the stock."
Apart from weak European markets, the sharp drop in shares of IT stocks was the key reason behind a 1.4 per cent drop in key stock market indices – Sensex and Nifty. The Sensex fell 1.37 per cent, or 238.11 points, to 17,094.51. Infosys (201.82 points), TCS (43.3 points) and Wipro (13.2 points) together contributed nearly 258 points to the Sensex losses. At the National Stock Exchange, the 50-stock Nifty dropped 1.32 per cent to 5,207.45.
“Markets opened on a sour note in the morning on the back of the disappointing guidance by Infosys. However, they slid further in the second half, likely due to some further selling ahead of the weekend, after European markets opened lower,” said Dipen Shah, head-fundamental research, Kotak Securities.
Major European markets were trading between 0.5 per cent and 1.5 per cent lower at 7:15 pm IST on concerns surrounding Spain's rising borrowing costs and disappointing Chinese growth data.