Shares of IT companies viz., Infosys, Wipro and HCL Tech takes maximum brunt as investors sweat over US and EU crisis
Infosys crashed 5.48%, Patni 4.2%, TCS 2.7%. The sectoral index's fall is more than the 13% fall for the benchmark Sensex.
By Nihar Gokhale, ET Bureau | Updated:
MUMBAI: Infosys, Wipro and HCL Tech fell to their lowest levels in the year, making the BSE IT index the worst performer on Friday as outlook on US and European economies deteriorated. The IT firms get more than three-fourths of the revenues from overseas.
"The Infosys management reiterated that it has not seen any deal cancellations," said Citigroup analysts led by Surendra Goyal. "However, the tone was cautious through the day, with various vertical heads suggesting that what is happening could lead to clients delaying biginitiatives - clients could continue to do shorter-term quick projects.''
The 10-member BSE IT index tumbled 4.4% to 4804.87, losing about a fifth of its value in about a month since the debate about US defaulting on debt intensified. Infosys crashed 5.48%, Patni 4.2%, TCS 2.7%. The sectoral index's fall is more than the 13% fall for the benchmark Sensex. BNP Paribas recently said the outlook on the sector was 'deteriorating and downgraded IT services. It cut rating to 'reduce' on six stocks - Infosys, TCS, Wipro, HCL, MindTree and Persistent Systems.
"Our regression analysis of historical Indian IT services growth versus US GDP growth and a base effect variable suggests a fairly strong relationship," BNP Paribas' Abhiram Elaswarapu said, "Therefore, over the next few quarters, not only should Indian IT growth slow due to a higher base from continued headcount dependence, but weaker macro data should only worsen the situation."
Infosys was down over 7% in early trading and touched its 52-week low of 2,171.6, before recovering to close at 2,225. On the BSE, Infosys closed 5.79% in the red, leading the fall of the BSE IT index, which was down by 4.41% after touching its 52-week low of 4,638.8. Patni and TCS fell by 4.11% and 3.36% each on the BSE. But some analysts still keep ratings as there are no visible signs of losing deals.
"Since there is no real change in client spending as of now, we have maintained 'buy/hold' on IT stocks," said Srishti Anand, IT analyst at Angel Broking. "The market is reacting to the S&P downgrade, which seems unfair. Such a knee-jerk reaction looks unwarranted." There is a possibility of earnings downgrade, probably after the second quarter earnings announcement in October. "A consensus downgrade is likely only after Q2," said Sanjeev Hota, asst VP research at Sharekhan.
"The Infosys management reiterated that it has not seen any deal cancellations," said Citigroup analysts led by Surendra Goyal. "However, the tone was cautious through the day, with various vertical heads suggesting that what is happening could lead to clients delaying biginitiatives - clients could continue to do shorter-term quick projects.''
The 10-member BSE IT index tumbled 4.4% to 4804.87, losing about a fifth of its value in about a month since the debate about US defaulting on debt intensified. Infosys crashed 5.48%, Patni 4.2%, TCS 2.7%. The sectoral index's fall is more than the 13% fall for the benchmark Sensex. BNP Paribas recently said the outlook on the sector was 'deteriorating and downgraded IT services. It cut rating to 'reduce' on six stocks - Infosys, TCS, Wipro, HCL, MindTree and Persistent Systems.
"Our regression analysis of historical Indian IT services growth versus US GDP growth and a base effect variable suggests a fairly strong relationship," BNP Paribas' Abhiram Elaswarapu said, "Therefore, over the next few quarters, not only should Indian IT growth slow due to a higher base from continued headcount dependence, but weaker macro data should only worsen the situation."
Infosys was down over 7% in early trading and touched its 52-week low of 2,171.6, before recovering to close at 2,225. On the BSE, Infosys closed 5.79% in the red, leading the fall of the BSE IT index, which was down by 4.41% after touching its 52-week low of 4,638.8. Patni and TCS fell by 4.11% and 3.36% each on the BSE. But some analysts still keep ratings as there are no visible signs of losing deals.
"Since there is no real change in client spending as of now, we have maintained 'buy/hold' on IT stocks," said Srishti Anand, IT analyst at Angel Broking. "The market is reacting to the S&P downgrade, which seems unfair. Such a knee-jerk reaction looks unwarranted." There is a possibility of earnings downgrade, probably after the second quarter earnings announcement in October. "A consensus downgrade is likely only after Q2," said Sanjeev Hota, asst VP research at Sharekhan.
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