Indian equities reversed the six-session rally on Friday, recording the year’s third biggest single-day fall and the steepest since March 13.
Dragged by the IT counter, the Sensex nosedived 887.64 points or 1.31% to close at 66,684.26, while the broader Nifty50 slumped 234.15 points or 1.17% to close below the 19,800-mark, at 19,745.
HCL Tech (3.33%), Wipro (3.07%), and TCS (2.68%) were among the other top laggards in the Sensex pack. On the other hand, L&T and NTPC were top gainers, rising 3.9% and 1.1%.
“The Nifty opened lower, dragged by selling in IT heavyweights after Infosys lowered its FY24 growth guidance. All eyes will now be on the US Fed and ECB policy meeting. Investors will also take cues from various macro data that will be released. With the results season picking up pace, we expect a lot of stock-specific action in the coming week. Besides Reliance, the banking sector is also likely to be in focus,” said Siddhartha Khemka, head – retail research, Motilal Oswal.
The Nifty IT index fell 4% on Friday, having gained 11.4% in the past three months. Infosys slid over 8% to end at Rs 1,331.6. The other top losers were Persistent (5.8%) and Tech Mahindra (4.6%). MphasiS bucked the trend, gaining 5.3%.
Infosys’ revenue grew 1% sequentially in constant currency terms, slightly above the Street’s median estimate of 0.8% sequential growth. However, the company downgraded its FY24 CC revenue growth guidance to 1-3.5% (from 4-7% earlier), likely paring the ask rate for the next three quarters, even below pre-pandemic levels.
“Soft and uncertain demand environment has led to pessimism on growth. Despite a robust order book, actual transitioning to revenues seems obscure and is a headwind,” said a note by Elara Securities.
The brokerage downgraded Infosys to ‘sell’ from ‘reduce’, and cut its FY24E/25E EPS to 2.1%/5.6% and pared the target price to Rs 1,230 from Rs 1,350 on 18.5x Jun-25E P/E.
Similarly, TCS remains cautious about near-term demand amid adverse macros. “The weakness persists in verticals like BFS, communication and retail due to a slowdown in discretionary spending, while the focus is shifting to efficiency-driven projects. The management also indicated that the small deals are getting scrutinised and taking more time to ramp up,” said a note by Motilal Oswal Financial Services.
Geojit Financial Services has an optimistic outlook for the IT sector despite muted Q1 numbers. It believes Indian IT companies could rebound in the next couple of quarters with sustained margins and a growing order book size.
“The sector’s valuation has dropped significantly by over one-third, making it an attractive long-term investment option. Major growth drivers such as Cloud, digitalisation, generative AI, and cybersecurity further enhance its revenue potential. We recommend TCS & LTIM among large caps, and Cyient in small caps,” said Vinod TP, Research analyst at Geojit Financial Services.
A total of 1,530 stocks advanced on the BSE, while 1,854 declined. Among sectoral indices, the BSE Capital Goods and Industrials were top performers, up 1.7% and 1.3%, while the Information Technology and Teck indices slumped 4.4% and 3.9%, respectively.
Investor wealth saw an erosion of Rs 2.44 trillion over the past two sessions, but remains above the Rs 300-trillion mark, at Rs 302 trillion.
On a weekly basis, the Sensex gained 0.94%, while the Nifty rose 0.92%.