LTIMindtree, Persistent Systems and other IT stocks get Accenture boost; Can the gains sustain?

Shares of Information Technology (IT) companies opened on a strong note in Friday’s trade (June 21) even as IT services and consulting major Accenture reduced its revenue guidance for FY24 from the previous 1-3 per cent to 1.5-2.5 per cent. This revision came as Accenture, considered as a benchmark for the Indian IT industry, announced its Q3FY24 results on Thursday. Accenture follows a September-August financial year.

In early trade, while the Nifty IT index was up around 2.6 per cent, all its ten constituents traded in the green, with LTIMindtree leading the pack with over 4 per cent gains. Other stocks from the basket also saw gains between 2-4 per cent.

Accenture for the review period posted a total revenue of $16.47 billion as against $16.56 billion in the same period last year, marking a 1 per cent fall. Overall, the company's results reflected continued pressure on discretionary spends, with growth led primarily by managed services deals.

Zee Business Managing Editor Anil Singhvi said that Dublin-based Accenture has slashed the revenue growth guidance for FY24, nonetheless, the reduction is lower than estimates. In the previous day’s trade, after Accenture posted decent results, its stock price surged as much as 7.5 per cent and a similar run-up is expected to be replicated by the Indian IT companies today.

Can you expect sustained gains ahead? Here's what global brokerages and experts make of Accenture's earnings and its impact on Indian IT stocks

Global brokerage Morgan Stanley said that few positive data points such as strategy and consulting are returning to growth and there is a pickup in smaller deals, possibly confirming bottoming out of growth rates. Further, it believes that the revenue growth recovery for Indian IT services companies is likely to be gradual. Overall, the brokerage maintains a marginally positive sentiment for Indian IT companies.

Hong Kong-based global brokerage CLSA believes that the lack of further decline in FY24 organic sales growth guidance is a positive. Also, the company has registered a sharp increase in the managed services order book, Further, it mentioned that there is a huge focus on Gen AI across industry verticals. The brokerage said there has been witnessed significant divergence in terms of performance across industry verticals this quarter.

Nomura, meanwhile, stated that while Accenture has tightened its revenue growth guidance to 1.5-2.5 percent, the order booking growth has been robust driven by large projects. Furthermore, deal wins remain robust driven by large cost takeout projects.  The brokerage in view of this has continued with its cautious stance as discretionary revival is still some time away. The brokerage remains selective and maintains a 'buy' rating on Tech Mahindra in largecaps and Coforge, Birlasoft & eClerx In midcaps. At the same time, it gives a 'reduce' rating on TCS, Wipro, LT|Mindtree, L&T Tech Services And Mphasis.

Anil Singhvi's views on IT stocks

The expert has suggested to buy LTIMindtree futures with a stop loss at Rs 4,990 for targets of Rs 5,095 and Rs 5,150. Similarly, he has recommended buying futures of HCL Tech with a stop loss at Rs 1,432 for targets of Rs 1,465 and Rs 1,470. And also adviced a buy on Mphasis futures with a stop loss at Rs 2,402 for targets of Rs 2,455 and Rs 2,470.