Information technology (IT) stocks recorded their sharpest single day fall in past six months on Thursday with most of the frontline stocks slipping 7% on profit booking. Among sectoral indices, the S&P BSE IT index was the hardest hit in trade on Thursday, slipping nearly 4%, or 315 points to 8,450 levels as compared to less than one per cent fall in benchmark index S&P BSE Sensex.
Among individual stocks, HCL Technologies, Tata Consultancy Services (TCS), Infosys, Tech Mahindra, Wipro, CMC and MindTree lost between 2 – 7% on the BSE.
Earlier on April 12 this year, IT index had tanked 11% against less than 2% drop in the benchmark index after Infosys issued weak revenue guidance for financial year 2014.
Most investors flocked to the IT stocks as a safe haven bet in volatile market conditions amid a sliding rupee against the US dollar. Most stocks had outperformed the market with BSE IT index surging 15% compared to 4% rise in benchmark index in past one month on expectation of strong set of numbers from technology companies. In past three months, IT index has rallied 28% against less than 3% gain in S&P BSE Sensex.
Sharp fall
Among individual stocks, HCL Technologies, Tata Consultancy Services (TCS), Infosys, Tech Mahindra, Wipro, CMC and MindTree lost between 2 – 7% on the BSE.
Earlier on April 12 this year, IT index had tanked 11% against less than 2% drop in the benchmark index after Infosys issued weak revenue guidance for financial year 2014.
Most investors flocked to the IT stocks as a safe haven bet in volatile market conditions amid a sliding rupee against the US dollar. Most stocks had outperformed the market with BSE IT index surging 15% compared to 4% rise in benchmark index in past one month on expectation of strong set of numbers from technology companies. In past three months, IT index has rallied 28% against less than 3% gain in S&P BSE Sensex.
Sharp fall
HCL Technologies was the largest loser in this pack that cracked 7% to Rs 1,079 after hitting a record high of 1,177 on Tuesday, while investors booked profit in TCS after the company reported a strong set of numbers for the quarter ended September 2013. The stock lost 5% after making an all-time high of Rs 2,259 in the previous session.
The company’s dollar revenue grew by 5.4% quarter-on-quarter (q-o-q) to $3,337 million. TCS’ EBITDA and EBIT margins jumped up by 300 bps (basis points) and 314 bps q-o-q to 31.6% and 30.2% respectively, aided by sharp Indian rupee depreciation.
Analyst at Angel Broking remains positive on the stock with target price of Rs 2,500 per share saying TCS which has been a consistent performer and the operational exuberance from the company continues.
Point out Kuldeep Koul and Varun Sharma of ICICI Securities in their October 15 report: “TCS is trading at 20x our FY15 EPS estimate of Rs110, which embeds EBIT margins of 28.4%, higher than the management’s target range of 26-28%. We see the valuation as full and near-term upside on the stock as limited. We upgrade the target multiple to 21x from 20x earlier and retain our ADD rating given consistency in execution and best-in-class revenue predictability. TCS will eventually grow into its valuation. We however see more upside in Infosys.”
HCL Technologies also posted better-than-expected 3.5% q-o-q growth in dollar revenue at $1,270 million for the quarter under review. The company’s EBITDA and EBIT margins jumped up by 300bp each to 26.3% and 23.8% respectively. Analysts at Prabhudas Lilladher suggest that there is room for 3–5% EPS upgrade.
| Returns in % | |||||
| Company | 15-Oct-13 | 3 mth | 1 mth | 17-Oct-13 | % chg |
| HCL Tech | 1160.40 | 32.5 | 16.4 | 1083.15 | -6.7 |
| TCS | 2218.15 | 34.5 | 16.6 | 2107.70 | -5.0 |
| Tech Mahindra | 1583.15 | 44.9 | 23.8 | 1527.85 | -3.5 |
| Wipro | 510.40 | 36.0 | 13.2 | 495.10 | -3.0 |
| Infosys | 3348.30 | 22.6 | 11.9 | 3270.10 | -2.3 |
| BSE IT index | 8764.77 | 28.4 | 14.5 | 8449.78 | -3.6 |
| S&P BSE Sensex | 20547.62 | 2.6 | 4.1 | 20415.51 | -0.6 |
| Price in Rs on BSE | |||||
| Data complied by BS Research Bureau | |||||