Infosys nears 52-week low; stock slips 12% in one month on growth concerns

Following recent developments around bankruptcy of Silvergate, SVB and Signature Bank in the US and UBS-CS merger will likely lead to further curtailing of discretionary tech spends in the near term.

Shares of Infosys were down 1 per cent to Rs 1,372, hitting a six-month low, on the BSE in Thursday's intra-day trade as growth concerns weighed on investos' sentiment. The stock of the information technology (IT) company was quoting lower for the fourth straight day, down 3.5 per cent during the period. It was trading close to its 52-week low level of Rs 1,355.50, touched on September 26, 2022.

In the past one month, Infosys has underperformed the market by falling 12 per cent as analysts believe there can be a pause or slowdown in the pace of digital/cloud programs due to cut in discretionary spending by clients in the near-term. In comparison, the S&P BSE Sensex was down 2.4 per cent during the same period. Further, in the past one year, the stock price of Infosys has dipped 27 per cent, as against 1 per cent rise in the benchmark index.

"Caution among Banking & Financial Services (BFS) firms in developed markets, following recent developments around bankruptcy of Silvergate, SVB, and Signature Bank in the US and UBS-Credit Suisse merger in Europe will likely lead to further curtailing of discretionary tech spends in the near-term," Kotak Institutional Equities said in a recent IT sector update.

This will likely impact growth for Indian IT in H1FY24, and bring down overall growth for FY24. Spending on cost take-outs will pick up, but will yield benefits in H2FY24 or later, the brokerage firm said.

"We expected a growth slowdown in FY24 to play out in the form of a weak March 2023 quarter, followed by a moderate uptick in Q1FY24, and normalization in Q2FY24. Current woes in the banking sector, however, can impact sequential growth by 1-2 per cent in Q1FY24. This assumes quick resolution to the global banking crisis and problems remaining localized to BFS," it added.

Analysts at Nirmal Bang Securities, meanwhile, believe there is a lot of divergence in views on FY24. "We are assuming a low-mid single-digit growth from both lower volume as well as some price compression whereas consensus is building in a high single digit growth implying a soft landing in the US. We expect tighter IT spendings by customers due to a significantly weaker corporate revenue/profit picture amid a likely shallow recession in CY23 in the US (our base case). TTM net new Book TCV/Bill ratio has been at ~24% for the last five quarters (not including sub-US$50mn deals) and may weigh down on growth in FY24," the brokerage said in a December quarter result update.