TCS Profit Warning Creates Tremors; Top-5 Firms Shed Rs 34,000 cr in M-cap 

Mumbai: Concerns over weak revenue guidance by TCS spooked the IT counter on Thursday, with the top five IT stocks losing about Rs 34,000 crore in market value as investors considered the Indian IT major’s outlook as a pulse of the domestic IT industry. As a result, domestic bourses witnessed panic selling in technology counters.

In overall, the total market capitalization of five top IT majors fell by Rs33,883crore on Thursday. Shares of TCS slumped 5.14 per cent to Rs 2,321.15. It lost Rs 24,798 in m-cap for the day. At close, the market capitalisation (m-cap) of the most valued stock on BSE stood at Rs 4,57,366 crore compared with Rs 4,82,164 crore in the previous session. Infosys shares fell 1.62 percent to Rs1,037.90 and lost Rs3,928crore of market capitalization toRs2,35,850crore. Wipro’s Mcap fell Rs2,078croe, HCL Technologies market valuation eased by Rs1,884crore and Tech Mahindra lost Rs1,195crore.

TCS says US Financial Clients Delaying Spending

Terming the customer outlook as one marked by abundant caution, the country’s largest software services firm TCS has warned that its financial sector clients in the US are holding back on discretionary spends, leading to a sequential loss of momentum. Based on data at the end of August 2016, the company has characterised customer outlook as one marked by abundant caution, with some holding back of discretionary spending - particularly in the BFSI vertical in the US, resulting in a sequential loss of momentum, TCS said.

The cautionary note sent shares of TCS plunging as much as 6.5 per cent during the day on BSE, wiping out Rs 31,527 crore from its market valuation. The stock was the worst performer among the bluechips on both Sensex and Nifty components. The US is the biggest market for India’s $150 billion software outsourcing sector, followed by Europe.

Last week, Bengaluru-based Mindtree had warned that its revenues in the second quarter are expected to be lower than the first quarter, a trend that market watchers feel is indicative of a difficult FY2016-17 for the Indian IT sector. Mindtree had attributed the warning to cross-currency movements, project cancellations and slower ramp-ups in a few large clients across different verticals. Mindtrees warnings confirms our thesis of a difficult FY17 (and most likely H1FY18) for the sector as a whole, Emkay had said and added that it continues to see downside risks to overall industry growth.

Other larger companies Infosys and Wipro, that disappointed the street with muted first quarter numbers, had said they were facing unanticipated headwinds and slower project ramp-ups in large deals. However, industry body Nasscom has so far maintained that there is no immediate reason to revise forecast of 10-12 per cent revenue growth in IT exports for FY17.

With inputs from PTI