The information and technology gauge Nifty IT sank over one percent in the opening session on Monday, June 23, after U.S.-based IT bellwether Accenture reported its earnings for the May quarter, flagging lower growth going ahead, along with rising uncertainties.
The company reported revenue of $17.7 billion for the quarter ended May 31, compared with analysts' average estimate of $17.30 billion, according to data compiled by LSEG. However, Accenture said new bookings decreased 6 percent to $19.7 billion in the third quarter.
Accenture is widely considered as a benchmark for Indian IT companies, offering insights into their likely performance. Accenture’s earnings report is a key indicator for the IT industry globally, including the Indian tech firms that rely heavily on services exports for revenue.
Therefore, when Accenture said it continues to see a significantly elevated level of uncertainty in the global economic and geopolitical environment compared with CY24, domestic IT companies faced selling pressure in trade. Accenture added that its clients are facing various challenges, including economic volatility, geopolitical complexity, and major shifts in customer behavior.
At 9.50 am, the Nifty IT index was 1.5 lower, with Persistent Systems as the only gainer. All nine other constituents were deep in the red, with Infosys, TCS and HCL Technologies leading the losses, falling between 1.6 - 2.5 percent.
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Accenture's moderating revenue growth guidance in Q4 and another quarter of weak deal booking raise concerns on growth momentum sustainability, especially during a period of elevated uncertainty, said Emkay Global. The brokerage said its pecking order in large-cap IT firms is: Infosys, TCS, HCL Technologies, Tech Mahindra, LTIMindtree and Wipro.
"We expect the growth momentum in the financial services vertical to continue in the near term for
Indian IT services companies. There has been no meaningful deterioration of the demand
environment since the 90-day pause on tariff imposition by the US administration in early April.
However, a sharp growth revival hinges on macroeconomic improvement particularly in the US," said Japan-based Nomura. The brokerage remains bullish on Infosys, Coforge and Cognizant Technology Solutions.
The Nifty IT Index has lagged the benchmark index by 1.2 percent over the past three months and 16.6 percent over the past six months, driven by cautious client spending amid persistent macroeconomic uncertainty and earnings downgrades.
However, it has seen a partial recovery in the past month, rising 4.6 percent and outperforming the broader markets by 3.5 percent. This rebound has been supported by a stable demand environment, expectations of interest rate cuts in the U.S., and signs that the earnings downgrade cycle may have bottomed out.
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