IT shares extend fall; Infosys, HCL Technologies down 3%

In past two trading days, the CNX IT index dipped 3% against a less than 1% decline in the CNX Nifty.

Information technology (IT) shares are continued under pressure for second straight day with the Infosys and HCL Technologies falling 3% each on the National Stock Exchange (NSE).

Infosys management on Monday revised its FY16 US$ revenue growth guidance down to 6.4-8.4% year-on-year (YoY) from 7.2-9.2% earlier, while keeping its constant currency guidance unchanged at 10-12% YoY. The stock of Infosys was down 3% at Rs 1,085, extending its previous day’s 4% decline on the NSE.

HCL Technologies too down 3% at Rs 830, followed by Tech Mahindra and Tata Consultancy Services (TCS) down 1% each. Wipro was up 1% at Rs 588 on the NSE.

At 11:43 am, CNX IT index, the largest loser among sectoral indices, was down 1.4% compared to 0.31% fall in the CNX Nifty. In past two trading days, the IT index dipped 3% against a less than 1% decline in the benchmark index.

Rumit Dugar & Saumya Shrivastava, analysts at Religare Institutional Research said, no guidance upgrades by Infosys – despite two consecutive quarters of strong revenue-led earning per share (EPS) beat – is a disappointment as it implies a very low ask rate from next two quarters.

However, analysts maintain ‘buy’ rating on the stock with target price of Rs 1,240 from Rs 1,200 earlier.

“Overall, Q2FY16 was a strong quarter for Infosys with good revenue momentum and solid performance across service lines and geographies. We slightly tweak FY17/FY18 estimates on a higher INR but largely maintain our EPS estimates for both years,” analysts said in a report.

Angel Broking maintains accumulate rating on the stock with a target price of Rs 1,306.

“The revision in the US$, is mainly on the outlook of the company on the currency front. The company has also mentioned that it expects 2HFY2016 is weaker than 1HFY2016, and also that it is witnessing headwinds in some client accounts,” the broking firm said in a client note.

TCS is schedule to announce to its July-September quarter results today.