Mumbai: Stocks of Indian IT software makers fell sharply, responding to a relatively weaker revenue growth guidance by Cognizant, a US IT firm with significant chunk of employees based in India.
Cognizant reported over 15 per cent drop in net income for the quarter ended March 2019.
Cognizant also revised its full-year 2019 revenue growth outlook to 3.6-5.1 per cent in constant currency terms, significantly less than 7-9 per cent projected just a few months back.
This led to market fears that the going might gets tough for Indian IT majors as well. The biggest Indian IT company by market capitalization, Tata Consultancy Services (TCS) tumbled 3.70 per cent. In the intra-day trade the stock touched a low of Rs 2,125.15 but settled higher at Rs 2,132.50 on the BSE.
TCS was the worst hit among the Sensex stocks and the fall saw its market capitalisation being wiped off by a whopping Rs 30,732.03 crore to Rs 8,00,196.04 crore.
The other big losers were Hexaware Technologies (-2.73 per cent), Tech Mahindra (-2.16 per cent), HCL Technologies (-1.40 per cent), Wipro (-0.87 per cent) and Infosys -(0.84 per cent).
The BSE IT Index fell 1.91 per cent while the Nifty IT Index fell 1.89 per cent, underperforming the benchmarks, Sensex and Nifty-50, which closed down by 0.5 and 0.11 per cent, respectively.
Cognizant cited the first quarter underperformance and the likelihood of slower growth in financial services and healthcare as reasons for the massive reduction in full-year outlook.
The US Federal Reserve’s dovish stance on further monetary tightening on Wednesday also weighed on the IT stocks, as the rupee strengthening for the second consecutive day to 69.21 per dollar on Friday.
Kotak Institutional Equities, in a report on Cognizant, said, "Large part of the slippages seems specific to Cognizant and not representative of growth across the industry. However, the risk to industry growth from the financial services vertical cannot be denied. Clients in the capital market segment of banking have turned a bit more cautious in spending outlook. In addition, spending by regional banks in the US is also turning cautious. Other segments of financial services are steady, in our view."