TCS falls on outlook warning, trips other IT stocks as well

By: and |
Mumbai | Updated: September 9, 2016 7:40:27 AM

A clutch of India’s top IT companies lost a combined market capitalisation of Rs 33,882 crore, a day after India’s largest IT services provider Tata Consultancy Services informed exchanges that some of its customers are holding back discretionary spending particularly in banking, financial services, and insurance (BFSI) segment in the US.

TCS

A clutch of India’s top IT companies lost a combined market capitalisation of Rs 33,882 crore, a day after India’s largest IT services provider Tata Consultancy Services informed exchanges that some of its customers are holding back discretionary spending particularly in banking, financial services, and insurance (BFSI) segment in the US.

The US is the biggest market for India’s $150-billion software outsourcing sector, followed by Europe.

“Based on data at the end of August 2016, the company has characterised customer outlook as one marked by abundant caution, with some holding back of discretionary spending — particularly in the BFSI (banking, financial services and insurance) vertical in the US,

resulting in a sequential loss of momentum,” the country’s top software services exporter said.

TCS lost nearly Rs 24,798 crore in market capitalisation while Infosys lost Rs 3,928.38 crore, Wipro Rs 2,078 crore, HCL Technologies Rs 1,883 crore and Tech Mahindra Rs 1,518.71 crore. Shares of TCS on Thursday fell as much as 6.54%, touching an intra-day low of Rs 2,287 before closing the session at Rs 2,321, down 5.14%.

On the NSE, shares of the company dropped 4.85% to close at Rs 2,322.10 each.

Edelweiss Securities wrote on Thursday with the lack of momentum in the BFSI vertical, which contributes 40% of TCS’ revenues, “the chances of a strong Q2FY17 were dim. On the positive side, though, Europe BFSI is doing well despite Brexit and management has maintained its commentary on rest of business/services verticals. The US caution clearly reiterates our thesis that TCS, with a huge dependence on H1, has very little margin of safety. Even if the company posts 3.0% revenue growth in Q2FY17, it will require 1.0% CQGR to clock even 8.5% revenue growth in FY17,” the report said.

Last Friday, Mindtree had issued a profit warning for the second quarter due to project cancellations and continued weakness in UK subsidiary Bluefin. The Mindtree stock fell 1% over the last three days and closed Thursday’s session at Rs 515.

In Thursday’s trade, Infosys fell 1.62% and closed at Rs 1037.90, HCL Technologies dropped 1.70% to Rs 773.55, Wipro finished 1.77% lower at Rs 473.60 and Tech Mahindra was down 2.61% at Rs 458.90. The BSE IT Index fell 2.5%, extending its yearly loss of 8.1% against the Sensex rally of 11.2%. The Sensex was marginally up by 0.40% and closed at 29,045 points on Thursday.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition