Accenture outlook clouds Indian IT sector; HCL, Wipro top buys: Nomura

NEW DELHI: Shares of India’s technology companies remained under a bit of pressure in the afternoon trade on Friday after outsourcing and consulting services provider Accenture Plc slashed its full-year outlook, citing a pullback in spending by its consulting business clients.

However, most of the IT stocks bounced back towards the close of the trading day, but the outlook still remains clouded as the IT consulting business continues to remain under pressure.

Infosys closed 0.6 per cent higher at Rs 2493.25. It hit a low of Rs 2426 and a high of Rs 2500 in trade today.

Tata Consultancy Services ended 1.99 per cent higher at Rs 1518.40, while Wipro gained 0.7 per cent to Rs 349.80.

There are two negative factors weighing on the IT sector; one is the approval of the landmark immigration bill and the other is slowdown in discretionary spending environment, Nomura said in a report.

The US Senate approved a landmark immigration bill which is seen a negative as it might hurt companies by proposing higher fees and wages for temporary US workers.

Accenture reported disappointing 3QFY13 results where it missed revenue guidance and has slashed its full year revenue/EPS guidance which indicates that clients are pulling back in consulting while outsourcing growth is moderating.

Nomura is of the view that Accenture’s weak consulting growth indicates that there is still no improvement in the discretionary spending environment which is likely to hurt companies like Infosys.

Infosys will get hurt more due to its relatively higher exposure to discretionary segments.

“We reiterate our reduce ratings on Infosys citing weak fundamentals, impending risks from US immigration bill and TCS, where full valuation is likely to get hit hardest by the immigration bill,” said the note.

The brokerage prefers HCL Technologies and Wipro on greater revenue/margins surety, less severe impact from the immigration bill or prices factoring in risks from the bill, and more reasonable valuations.

“Indications that outsourcing growth is moderating again indicates that demand acceleration in the current year is not definitive, in our view,” said the note.