Shares of Tata Consultancy Services fell to their lowest level in six months after the technology major expressed concerns on the earnings on account of possible lower spending by banking, financial services and insurance (BFSI) players in the U.S.
In an update to the stock exchanges on business trends in Q2 this year, TCS said that based on data for August, “the company has characterised customer outlook as one marked by abundant caution, with some holding back of discretionary spending - particularly in BFSI vertical in the U.S. - resulting in a sequential loss of momentum,” it added,
Shares of TCS fell 5.14 per cent or Rs.125.85 to close at Rs.2,321.15. This also led to a 2.49 per cent or 259.09 points fall in the BSE IT index. This was in sharp contrast to the 0.41 per cent or 118.92 points rise in the benchmark Sensex, which closed at 29,045.28.
Market participants said that the concerns are not limited to TCS as other IT majors such as Infosys and Mindtree have also expressed concerns on earnings slowing down.
“The concerns are across the whole IT pack especially around companies that have a huge dependence on the BFSI segment and also exposure in the U.S. market,” said Sudip Bandyopadhyay, Group Chairman, IndiTrade Capital. He said that political rhetoric in election years had this effect on IT companies. “Valuations are stretched but it is not that these companies are de-growing. Things should be better after November,” he said.
Early this week, Mindtree’s management said that it expects Q2 revenue to be lower than that in Q1 due to “cross-currency movements, project cancellations and slower ramp-ups in a few large clients across different verticals and continued weakness in U.K subsidiary Bluefin.” Shares of Mindtree lost 0.88 per cent on Thursday while Infosys, Wipro, Tech Mahindra, Mphasis, Oracle Financial Services Software and Hexaware all lost in the range of 1-3 per cent each.
