Shares of Infosys were trading lower for the second straight day, sliding 3 per cent today to hit a 52-week low of Rs 565, on the BSE. The stock of the IT consulting & software firm was trading at its lowest level since April 19, 2018.
In the past two days, the market price of Infosys has slipped 12 per cent, as compared to a 7 per cent decline in the S&P BSE Sensex. In the past four weeks, too, the stock has underperformed the market by plunging 29 per cent, as against a 23 per cent fall in the benchmark index and 26 per cent decline in the S&P BSE IT index.
Information Technology counters' share prices have corrected sharply (23 per cent-29 per cent) over the last four weeks factoring in potential demand shocks from Covid-19 spreading to key client markets (US/ Western Europe), oil price shock and potential impact on global growth.
Analysts at JP Morgan believe that while the market is pricing-in a risk of significant demand destruction (4-6 per cent on revenues), it is ignoring earnings support from Rupee depreciation (5-9 per cent on EPS) and long term gains from greater offshore adoption and acceleration of digital transformation. This could create relatively attractive risk-reward for the sector.
"We believe that Tata Consultancy Services (TCS) and Infosys should be able to deal with the worse scenarios better than peers due to lower financial leverage and ability to drive delivery shifts," the brokerage firm said in recent report.
“Infosys’ exposure to Covid-19 impacted verticals appear to be fairly limited, the company has relatively higher proportion of business contracted on a T&M (Time and Material) basis. While some of Infosys’ customers in Travel and Hi-Tech have trimmed their guidance, risk of furlough enforcement can expand should the outbreak impact US more than expected,” the brokerage firm added.