IT shares gain on Accenture's strong Q2 show, higher revenue guidance

The strong guidance indicates that spending on change programs continues to be robust, a positive for Indian IT.

Shares of information technology (IT) companies were in focus on the bourses on Monday, with frontline stocks trading up to 2 per cent higher, after Accenture reported a robust set of earnings for the quarter ended February 2022 (Q2FY22).

The Dublin-based company's revenue grew 28 per cent year-on-year in constant currency terms and it raised its revenue growth guidance for the year (ending August) to 24-26 per cent, from 19-22 per cent. The sharp upwards revision, analysts said, indicated strong spending on change programs, which is positive for the Indian IT.

Wipro, Tech Mahindra, Infosys, Coforge and Mphasis from the Nifty IT index advanced in the range of 1 per cent to 2 per cent, while Tata Consultancy Services (TCS), Mindtree, L&T Technology Services and Larsen & Toubro Infotech gained less than 1 per cent on the National Stock Exchange (NSE) in the intra-day trade.

At 9:53 AM, the Nifty IT index was up 0.75 per cent at 35,910 points, after hitting a high of 36,135 in intra-day trade. In comparison, the Nifty 50 index was down 0.18 per cent at 17,256 points.

Accenture's broad-based, double-digit growth and an all-time high deal bookings of $19.6 billion (17 per cent above the previous high seen in Q1FY22) provide good demand visibility for the IT services. "Conversely, though the 10 basis points cut in EBIT (earnings before interest and tax) margin guidance for FY22 denotes some pressure, improved pricing and operating leverage should help offset the headwinds and aid profitability,"said Motilal Oswal Financial Services in a sector update.

It added: Accenture's commentary reinforces that the demand environment continues to remain strong and sustainable in the long run. Further, an upgrade in FY22 guidance provides visibility to the Indian IT services sector’s growth momentum.

"With strong bookings, robust pipeline, strong guidance upgrade, optimistic demand commentary and no impact of Russia-Ukraine crisis on business (yet), provides strong visibility for the Indian IT Sector," said Phillip Capital.