NEW DELHI: Following a dismal earning show by TCS and Infosys in the March ending quarter (Q4FY23), IT stocks are expected to remain under pressure for the next few quarters. Barring the exception of HCL Technologies, most IT stocks have plummeted by 10-30% in the past one year and following the Q4FY23 earning show, the stocks may witness increased selling pressure.
“IT stocks will remain under pressure for the first half of the financial year 2024 due to global slowdown and delay in execution despite strong order wins,” said Mitul Shah, market veteran and head of research at Reliance Securities.
“We expect a gradual recovery in the second half of FY24 and expect a strong bounce-back by fiscal end. We would wait for some more correction and better business visibility in coming quarters before entering this space,” added Shah. After Infosys’ and TCS’ Q4FY23 earnings numbers missed the street estimate, IT stocks plunged sharply on Monday.
On Tuesday, while TCS and Tech Mahindra closed with minor cuts, Wipro and HCL Tech closed with gains of up to 2%. Infosys, whose shares had fallen to a 52-week low on Monday, barely managed to close in the green. Infosys closed at Rs 1,259 on the NSE on Tuesday.
Infosys expects revenue in FY24 to grow between 4-7% while TCS said they still see the possibility of double-digit growth in FY24. Following the collapse of Silicon Valley Bank and Credit Suisse, BFSI vertical spending is likely to get impacted by a delay in decision-making and discretionary spending. India’s IT sector earns 25% of its revenue from the BFSI sector of the US and Europe.
Infosys and TCS reported quarter-on-quarter revenue declines of 3.8% and 0.8%, respectively, in North America. The revenue decline in North America was seen across verticals. Aamar Deo Singh, head advisory at Angel One said post-TCS, Infosys results, IT stocks have corrected sharply, on the back of investor fears of a slowdown, with clients from the US and Europe, adopting a more cautious approach.