IT stocks witness selling pressure

Shares of nine IT stocks fell 0.01% to 6% at 14:28 IST on BSE after a media report quoted Infosys executive saying that the company's clients were asking for 20-30% cut in prices for projects.

Hexaware Technologies (down 6%), TCS (down 4.17%), Infosys (down 3.28%), Tech Mahindra (down 3.23%), MindTree (down 3.21%), Wipro (down 3.06%), HCL Technologies (down 1.28%), MphasiS (down 1.22%) and Oracle Financial Services Software (down 0.01%), edged lower. Persistent Systems was up 1.91%.

The S&P BSE IT index was down 2.82% at 10,226.11. It underperformed the Sensex, which was down 0.01% at 31,188.92.

The S&P BSE IT index had outperformed the market over the past one month till 6 June 2017, rising 6.53% compared with 4.23% rise in the Sensex. The index had, however, underperformed the market in past one quarter, rising 1.12% as against Sensex's 7.92% rise. The index had also underperformed the market in past one year, falling 9.65% as against Sensex's 15.48% rise.

Infosys' chief operating officer Pravin Rao was quoted by the media as saying that clients are likely to slash their IT spend sharply. He said that clients are looking at cutting costs, something that would dent revenues for India's $150-billion IT industry.

As more deals come up for renewal, clients are asking for 20-30% cost take-out, explained Rao. Even if a company has been successful in execution, clients are asking for a reduction in costs by 20-30% for the same projects due to commoditisation, he reportedly said.

Meanwhile, IT majors like Wipro, Infosys, Cognizant and Tech Mahindra have reportedly initiated annual performance reviews, a process that weeds out bottom performers or non-performers. This has compounded fears that thousands of employees in the sector could be shown the door over the next few weeks, reports added.

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 64.41, compared with its close of 64.4275 during the previous trading session.

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