IT shares under pressure; Wipro, NIIT Tech, Tata Elxsi, Hexaware hit 52-week low

TCS, HCL Technologies, Wipro, Persistent Systems, Tech Mahindra and Hexaware Technologies were down 2%-3%.

Shares of information technology (IT) companies are under pressure with Wipro, NIIT Technologies, Hexaware Technologies and Tata Elxsi, hitting their respective 52-week lows on the BSE.

At 12:36 pm, the S&P BSE IT index, the largest loser among sectoral indices, was down 1.1% or 123 points at 10,267, as compared to 0.02% decline in the benchmark S&P BSE Sensex. The IT index hit an intra-day low of 10,230, its lowest level since February 29, 2016.

Tata Consultancy Services (TCS), HCL Technologies, Wipro, Persistent Systems, Hexaware Technologies and Tech Mahindra were down 2%-3%.

Since August 16, the IT index underperformed the market by falling 6% after Infosys said that Royal Bank of Scotland’s (RBS’) announced that it will no longer pursue its plan to separate and list a new UK standalone bank, Williams & Glyn (W&G), and instead will pursue other options for the divestment of this business. Infosys has been a W&G program technology partner for consulting, application delivery and testing services. The benchmark index was down 1.3% during the same period.

Analysts at Religare Institutional Research expect the near-term share price performance of Infosys to remain sluggish given concerns over FY17 guidance and the impact of Brexit on decision making. These factors will add to near-term volatility in the sector but analysts think Infosys’s valuations are inexpensive at 14x FY18E P/E and recommended ‘buy’ rating on the stock.

Given the macro-economic headwinds relating to Brexit, lower discretionary spending (especially in the financial sector), weaker-than-expected Q1FY2017 revenue growth and pricing pressure during project renewals, the near-to-medium term outlook for the Indian IT sector remains uncertain, Sharekhan said in sector update.

However, the brokerage firm believe that higher incremental spending in the digital space, coupled with strong traction in some industry verticals would provide impetus for increasing IT budgets over the next 2-3 years.