Infosys, TCS, HCLTech: IT stocks bleed as Accenture slashes revenue forecast for FY2024

TCS, Infosys, HCLTech shares, Accenture cuts forecast: Shares of IT services companies were trading with significant cuts on Friday, March 22, after Dublin-based multinational IT services company Accenture slashed its revenue forecast for the fiscal year 2024 amid increasing economic uncertainty. On Thursday, the IT bellwether revised its revenue forecast lower to 1-3 per cent from the earlier 2–5 per cent.

 "The firm has been grappling with sluggish demand for its IT and consulting services as high-interest rates slam the brakes on an industry that benefited from breakneck growth during the pandemic," said a Reuters report.

At around 9:45 am, while the larger Nifty IT index traded with a steep cut of over 3 per cent, the constituents traded with a cut of up to 4 per cent. Shares of HCL Technologies and LTIMindtree traded with the most cut of between 3.5 and 4.45 per cent, while others, including TCS and others, were down between 2-3.5 per cent.

As the IT services company sees its full-year growth fall in the range of 1-3 per cent, Infosys ADR (American depository receipt) as well as Wipro ADR both fell by 3.8 per cent and 1.8 per cent, respectively.

Earlier, the tech giant also reduced its revenue forecast in September to 2–5 per cent as against the earlier projection of 4.6 per cent. However, during the June quarter of fiscal year 2024, the company retained its revenue growth outlook at 2–5 per cent in local currency terms. 

The company expects the client's spending to take a hit in the consulting services space. Furthermore, in this backdrop, concerns are emerging concerning the revival of Indian IT companies.

Zee Business Managing Editor Anil Singhvi said that investors should not fret about Accenture's weak revenue outlook. Further, the expert said that Accenture, after a sharp run-up, is seeing an aggressive beating now. 

Amid the downfall in IT shares, Singhvi advised buying Coforge, Tech Mahindra, and TCS.

Brokerages' view after the recent Accenture revenue outlook cut

CLSA

The brokerage is of the view that the commentary of Indian IT companies and their outlook on banking and telecom sectors are weak. In addition, the earnings downgrade cycle is still not factored into valuations.

Nomura

The global brokerage stated that, amid sluggish discretionary spending, Accenture has slashed its revenue outlook. Further, the brokerage continues with its cautious stance on IT sector companies.

Morgan Stanley

There remains an earnings recovery overhang for Indian IT companies, and the recovery may continue at a slow pace going forward, as per the brokerage.

Motilal Oswal Financial Services

The brokerage underlines the cautious spending environment in the near term, which should drag down FY24 operational performance for Indian IT companies. Demand for financial services and CMT, which have been the key verticals for Indian IT firms, continued to be weak in 2QFY24, added the brokerage report.

JM Financial

The domestic brokerage said that weak guidance from global peers points to a growth deceleration in CY24. Furthermore, Accenture's latest guidance further underlines the trend. That puts current FY25 growth estimates for large-cap India IT services peers (4–9%) at risk. The brokerage anticipates higher risk than Infosys estimates.