Nifty IT index down 4%; Infosys, TCS Q1 earnings weigh

Infosys, TCS, Cyient, Wipro, Tech Mahindra and NIIT Technologies were down 3%-9% on the NSE.

Shares of information technology (IT) companies were under pressure with the Nifty IT index dropping 4% after Infosys lowered its FY17 constant currency (CC) revenue growth guidance to 10.5%-12% from 11.5%-13.5% earlier.

At 03:02 PM, Nifty IT index was down 4% or 447 points at 10,711, as compared to 0.29% decline in the Nifty 50 index.

Among individual stocks, Infosys trading 9% lower at Rs 1,075, after hitting low of Rs 1,052 in intra-day trade post announcement of April-June (Q1FY17) earnings. Tata Consultancy Services (TCS), Cyient, Wipro, Tech Mahindra and NIIT Technologies were down 3%-6%.

“Infosys’ Q1FY17 revenues grew 2.2% quarter-on-quarter (QoQ) in US$ against expectations of around 4%. Revenue in CC term grew by 1.7% QoQ against our expectations of 4% growth,” analyst at Prabhudas Lilladher said in a note.

The brokerage firm said TCS’s Q1FY17 revenues were below expectations, while margins were above expectations. Q1FY17 CC revenues are up 10.1% YoY, while EBIT margins are down 120bps YoY, resulting in muted 3% YoY USD EBIT growth.

However, Prabhudas Lilladher retains BUY on Infosys and view stock correction as a buying opportunity.

We retain our below consensus earnings estimates and “Accumulate” rating on TCS with a target price of Rs 2,620 based on 18x FY18 EPS, added report.