India’s Infosys tumbles 15% on weak revenue outlook, drags sector

Infosys Ltd (INFY.NS) shares slumped nearly 15% on Monday, dragging peers and the benchmark index, after the company’s dismal revenue outlook raised concerns about demand for Indian IT services amid global banking turmoil and recession fears.

Infosys’ outlook last week followed a disappointing quarterly report from larger rival Tata Consultancy Services (TCS.NS), highlighting worries for the sector which earns more than 25% of its revenue from just the U.S. and European banking, financial, services and insurance sector.

The collapse of two mid-sized U.S. lenders in March had left the financial ecosystem shaken and driven an extraordinary government effort to reassure depositors and backstop the system.

“Some of the macro challenges especially around banking, financial services and insurance (BFSI) has become bigger and that does mean project cancellations or delays in the deal decision cycle,” said Apurva Prasad, vice president of institutional research, HDFC Securities.

Prasad said he was expecting a sequential decline for companies like HCLTech (HCLT.NS), Wipro (WIPR.NS) and Tech Mahindra (TEML.NS) on constant currency basis.

Infosys, India’s second-largest IT services firm, on Thursday, said it expects revenue growth of 4%-7% on a constant currency basis for the fiscal year ending March 2024, well below analysts’ expectations of 10.7% growth, as clients cancelled some projects and deferred spending on growing fears of a recession.

The previous slowest annual growth was a 5.8% increase in fiscal 2018.

Infosys fell as much as 14.7% to 1,185.3 rupees on Monday in its biggest intraday percentage drop since October 2019. The Nifty IT index (.NIFTYIT) dropped as much as 7.6%.

Bengaluru-based Infosys’ net profit of 61.28 billion rupees ($748.21 million) in the January-March quarter also missed analysts’ expectations of 66.24 billion rupees, according to Refinitiv IBES.

Smaller rival HCLTech (HCLT.NS) is due to report results later this week, while Wipro (WIPR.NS) is expected next week.

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