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  1. Infosys drags technology stocks lower

Infosys drags technology stocks lower

Weaker revenue guidance of Infosys spooks investors; peers, barring HCL, take a hit as well

By: | Mumbai | Published: October 13, 2015 12:12 AM

Infosys shares declined nearly 4% on Monday as the company lowered its FY16 dollar revenue guidance range to 6.4-8.4% from 7.2-9.2%. Infosys, however, retained its constant currency revenue guidance for FY16 at 10-12%. The scrip closed at Rs 1,122.50 on BSE – down Rs 45.35, or 3.88%.

In a volatile session of trading, shares of Infosys – India’s second-largest IT company — started on a positive note as the stock hit its 52-week high on both BSE and NSE. A total of 1.64 crore shares changed hands across the stock
exchanges – four times the three-month daily average of 44.6 lakh.

During the quarter ended September, Infosys’ net profit rose 12.1% sequentially to Rs 3,398 crore while the rupee revenue went up 8.9% to Rs 15,635 crore. On the other hand,  dollar revenue climbed 6 % to $2.392 billion, making it the steepest climb in 16 quarters.

The overall financial performance of the company continues to look good and IT stocks will recover in the near term, said an analyst with a domestic brokerage firm requesting anonymity, adding that Infosys has seen a great improvement in aspects like attrition rates of its employees. For the quarter ended September 30, Infosys
reported an annualised standalone attrition rate of 14.1% – down nearly 700 bps year-on-year.

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The decline of Infosys shares dragged other IT scrip as the BSE Teck index closed 117.39 points, or 1.87%, lower. In the IT universe, shares of TCS – India’s largest IT company – lost 1.21% while shares of Wipro lost 1.24%.

Shares of HCL Technologies, however, closed 0.7% higher. During last week, HCL Technologies issued a revenue warning for Q1FY16. In a filing to the stock exchanges, the company said it expects a tepid US dollar revenue growth during Q1 due to negative forex impact of 80 bps, a slowdown in the infrastructure management services (IMS) segment due to transition issues and client-specific issues in a public services application development and maintenance (ADM) project, which should lead to a provision of $20 million.

The IT scrips have outperformed the benchmark indices during the current calendar so far. The sectoral index for IT shares on BSE gave more than 5% yields during the year against -2.2% returns by Sensex. Brokerages continue to sound bullish about the prospects of IT scrips.

Switzerland-based investment banking firm Credit Suisse said in a note to investors that Q2FY15 earnings for IT companies would be positive. “September 2015 is likely to be a strong quarter for most Indian IT firms due to seasonal strength and favourable moves in the key currencies like dollar. We believe that the demand environment remains stable and this quarter’s underlying growth trends may reflect the same,” said Anantha Narayan director-equity research, Credit Suisse, in the report.

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