Indian IT companies have slumped 3-5% on Friday after the global IT major Accenture reduced its revenue growth guidance for 2024 on concerns about global uncertainty and weak client spending on consulting services.
HCL Tech emerges as the top loser within this group, witnessing a decline of over 5%, marking its most significant single-day drop in 15 months as per the data.
Accenture’s revised forecast now anticipates its full-year revenue to grow between 1% to 3%, down from the earlier projection of 2% to 5%.
Friday’s downturn has turned the Nifty IT index negative for the year and dropped over 7% this week. LTIMindtree emerges as the most significant laggard, experiencing a decline of 21% year-to-date, while Mphasis and Coforge have also registered declines ranging between 12% to 13%.
Here’s What Analyst View on IT Companies
“Accenture’s results can have a two-sided impact on Indian IT companies like TCS, Infosys, and Wipro. Accenture’s cautious guidance for the next two quarters suggests a potential slowdown in IT spending. Their lower-than-expected earnings growth guidance for the next two quarters might cause investors to be cautious about Indian IT companies as well. Accenture’s decline in operating margins indicates rising costs. Indian IT companies might face similar pressures, impacting their profitability,” said Amit Goel, Co-Founder and Chief Global Strategist at Pace 360.
Goel also added that, investors might be reevaluating their growth projections for these companies. The IT sector might experience some volatility in the near future due to the current market sentiment. We believe investors should hold off on making investments until there has been a significant correction as the equities markets are highly overpriced.
“Although global demand for services may face uncertainties, Indian IT companies can leverage their strengths in cost optimization and diversification to navigate through this period. By focusing on innovation and adapting to evolving industry dynamics, Indian IT firms can position themselves for sustainable growth despite the current economic landscape,” said Anirudh Garg, Partner and Fund Manager at INVAsset.
Garg also added that, for investors with a long-term view on the Indian IT sector, maintaining a balanced perspective amidst recent developments is recommended. While the recent downturn in the broader Indian IT index and Accenture’s conservative outlook present short-term hurdles, it’s important to recognize the sector’s enduring strength and potential for long-term expansion.