Infosys slides, drags peers as forecast cut fans demand worries

Shares of Infosys fell as much as 10% on Friday, dragging its peers and the benchmark index, after India's No.2 software exporter halved its full-year revenue growth outlook, fuelling worries about slowing demand for IT services.

The company cut its fiscal 2023 revenue forecast to 1%-3.5% on a constant currency basis from 4%-7%, with CEO Salil Parekh blaming clients delaying making decisions on signing new deals as well as starting contracts that have already been signed.

Shares of Infosys were leading losses both in the benchmark Nifty 50 index and the Nifty IT index.

The drop in Infosys and the IT index was the steepest since April 17 when Infosys had first issued its full-year revenue forecast, which disappointed investors and fanned worries about demand for Indian IT services amid a global slowdown.

The guidance cut reinforced those concerns.

"Infosys guidance cut reflects a tough macro environment leading to weakness in IT services spending in the near term," PhillipCapital Institutional Equity Research said, cutting its rating on the stock to "neutral" from "buy."

Also Read: United Spirits is having a Tata Communications moment, says Anil Singhvi; stock hits 52-week high post-Q1 results

Last week, market leader Tata Consultancy Services also warned of an uncertain demand environment, while smaller peers HCLTech and Wipro projected muted growth.

Still, not all analysts were concerned about a worsening market condition.

JM Financial said Infosys had erred on the side of optimism earlier and the forecast cut was more a "course correction" than a sign of demand deteriorating.

That was evidenced by Coforge, among the smaller IT firms, reiterating its full-year guidance due to a robust order book.

Indeed, on the day, shares of the smaller Coforge, Mphasis and L&T Technology Services were the only gainers on the 10-member IT index.

Infosys shares were last down 7.7% in late morning trading. Still, the stock is up just over 6% since April 17, when it first issued its forecast, while the IT index has gained about 11.5%.

Catch the latest stock market updates here. For all other news related to business, politics, tech, sports, and auto, visit Zeebiz.com.