IT shares trade weak in a strong market; TCS, Infosys down over 3%

IT shares trade weak in a strong market; TCS, Infosys down over 3%

Infosys tanked 8 per cent to Rs 742 on the National Stock Exchange (NSE) in early morning deal, logging the biggest single-day fall in two years. SI

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Infosys tanked 8 per cent to Rs 742 on the National Stock Exchange (NSE) in early morning deal, logging the biggest single-day fall in two years.

SI Reporter  |  Mumbai 

Shares of information technology (IT) companies were under pressure on Monday with the Nifty IT index falling nearly 3 per cent in the intra-day deals in an otherwise strong market.

At 12:11 pm, the index was the biggest loser among key sectoral indices, and was down 2.7 per cent as compared to a 3.4 per cent rally in the benchmark Nifty50 index.

Infosys tanked 8 per cent to Rs 742 on the National Stock Exchange (NSE) in early morning deal, logging the biggest single-day fall in two years. Currently, the stock was trading 4 per cent lower at Rs 773.

Meanwhile, Tata Consultancy Services (TCS) was down 3 per cent at Rs 2,000, after hitting a low of Rs 1,975 in the intra-day trade so far. HCL Technologies, Wipro and Tech Mahindra, on the other hand, from the Nifty IT index were down in the range of 1 to 3 per cent.

Analysts at Prabhudas Lilladher attribute such fall consequent to expectations of a weak growth in Tech spends in BFS clients in US and European geography due to trade war concerns, uncertainty on central bank policy and interest rates. Further, Brexit- related uncertainty and rupee advantage could also weaken the spending as compared to last year, they say.

“The new taxation rule will be neutral event for the Indian IT companies at the consolidated level, as US and UK rates are at 21 per cent and 18 per cent, respectively,” the brokerage firm said in a report.

Foreign brokerage firm JP Morgan, however, has ‘overweight’ rating on Infosys with June 2020 price target of Rs 850 per share.

“Infosys appears to be settling down well with new management in place. Despite risks of increasing macroeconomic uncertainty, the company’s management seems confident of achieving 8.5 per cent-10.5 per cent constant currency (CC) growth as the company continues to gain market share in digital business and its deal pipeline remains strong,” the brokerage firm said in a report dated September 12, 2019.

Although margins have been under pressure on account of rising on-site costs, we believe margins have troughed and the margin trajectory (ex-INR depreciation) may see an improvement from here, potentially hitting the high end of the EBIT margin guidance range of 21-23 per cent by the end of FY20, it added.

First Published: Mon, September 23 2019. 12:48 IST

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