Nifty IT index slips over 4% on profit booking; Infosys, HCL Tech tank 5%

Shares of information technology (IT) companies were trading up to 5 per cent on the National Stock Exchange (NSE) in intra-day trade on Thursday on account of profit booking ahead of Accenture’s second-quarter fiscal year 2021 (FY21) results later today. Accenture is a global professional services company with leading capabilities in digital, cloud and security. The company follows a September-August financial year.

At 02:19 pm, Nifty IT index, the top loser among sectoral indices, was down 4 per cent as compared to a 1.5 per cent decline in the Nifty50 index. In the month of March, the IT index has outperformed the market by surging 7.7 per cent as against a 1.3 per cent gain in the benchmark index till Wednesday.

Among individual stocks, Infosys and HCL Technologies slipped 5 per cent each while Tata Consultancy Services (TCS), Tech Mahindra, Wipro, Mphasis and Coforge were down in the range of 3 per cent to 4 per cent on the NSE.

For the quarter ended November 30 (Q1FY21), Ireland-based Accenture had reported strong earnings and also revised upwards its revenue growth forecast for the full fiscal year 2021 to 4-6 per cent from an earlier estimate of 2-5 per cent.

The disruption caused by Covid-19 has brought a paradigm shift in the way the world operates, pushing corporates – big or small – toward digital transformation and the adoption of cloud-based services. The IT industry has benefited in a very profound way from this shift. Analysts at Emkay Global Financial Service expect the acceleration in digitisation and cloud-adoption to drive a healthy recovery for Indian IT services firms.

Barring skill/resource optimal utilisation benefits, the brokerage firm expects most of such savings to fizzle out in the next few quarters as costs normalize and competitive pressures take away most of the residual benefits. 

"Operating margins are likely to sustain at year-to-date (YTD) FY21 levels in FY22, driven by the acceleration in revenue growth, offshoring, benefits accruing from remote working model and operating efficiencies, although wage hike and normalization of costs (travel, utility, etc.) may cut margins," it said in IT sector report.