Collateral damage from the Infosys share sell-off also affected other IT counters. After Infosys’ underwhelming performance in the March 2023 quarter, a number of IT counters, including several blue-chip companies, experienced a steep decline on Monday.
In the course of the trading session, Infosys, which had for the first time since March 23, 2020, began at a lower circuit of 10%, continued to exhibit weakness, falling by 12%. Another Nifty50 company, Tech Mahindra, fell 8% after Citi, a major global brokerage, downgraded the stock twice, to’sell’ from ‘neutral’ and dropped its target price to Rs 955 from Rs 1,100 per share.
As one of the main factors for downgrading Tech Mahindra, Citi cited elevated risks to growth in the communications sector, which generates around 40% of the company’s sales and about which recent data points and commentary have prompted worries. Additionally, a watch for a negative trigger has already been put in place and there are immediate problems.
LTIMindTree and Persistent Systems fell 10% apiece to Rs 4181 and Rs 3959.25, respectively, and were among the other losers. Coforge declined 7% to Rs. 3753.85. Mphasis and HCL Technologies both had declines of 4-6%.
Also read: Infosys shares hit lower circuit: LIC, Murthy family lost big within seconds. Here’re key details
According to ICIC Securities’ report, which cited an ISG (Information Services Group) survey, the overall ACV (annual contract value of ordering activity) for Q1CY23 was $24.1 billion, up 0.8% QoQ and down 7.7% YoY. Strength in managed services was offset by weakness in As-A-Services ACV.
“Due to a decline in discretionary spending in the BFSI vertical, ISG has reduced its as-a-services ACV growth prediction for CY23 from 17% to 15%. It anticipates that the bookings would continue to fall in Q2CY23 before sharply increasing in H2CY23. However, given its strong emphasis on clients’ cost-optimization agendas, it maintained its managed services growth outlook at 5%, according to the statement.
A different brokerage firm, B&K Securities, claimed that the IT sector faces numerous challenges, such as weakening growth, pressure on margins, macroeconomic uncertainty, and a lack of deal flow, which would make Q4FY23 a challenging quarter for IT companies.
