IT shares extend fall; TCS down 3%

In past two trading sessions, the S&P BSE IT index down 3.5% against 2% decline in the S&P BSE Sensex.

Shares of information technology (IT) companies were trading lower for the second straight day after UK's referendum outcome on June 24, 2016 in which it voted to exit the European Union.

Tata Consultancy Services (TCS), Infosys, MphasiS, Wipro, HCL Technologies and Tech Mahindra were down 1%-3% on the BSE.

At 11:53 AM, the S&P BSE IT index was down 1.4% at 11,146 points, as compared to 0.03% rise in the S&P BSE Sensex at 26,432. In past two trading sessions, the IT index down 3.5% against 2% decline in the benchmark index.

TCS was down 3.3% to Rs 2,484 on the BSE in intra-day trade. The stock was down 2.8% on Friday.

According to IDBI Capital, the UK has been a key growth market for the Indian IT Sector. Further, the UK has also been in once sense the gateway for the EU. We believe that BREXIT is near-term negative for the IT sector as it would lead to uncertainly of demand as well as volatility in EUR/GBP.

Elara Capital think that the most immediate and certain effect on Indian IT Services firms will be the cross-currency impact of depreciating GBP and EUR against the INR and the USD. Apart from affecting reported growth rates by 30-50 basis points, this is also likely to have a margin impact in the near-term.

“Currency volatility will be a key determinant of overall performance in future. GBP/EURO has already depreciated against USD/INR. Currency concerns have negative impact on revenue performance of many Indian companies especially in sectors like IT, Auto, Pharma and Metals. Major impact could be seen in Q2FY17E as there are only four days left to end in the current quarter for IT at present. Ascertaining the actual impact on business prospects looks difficult, except that client decision?making might get delayed for few IT companies,” IndiaNivesh Securities said in a note.