Infosys Shares Hit Over 2-Year Low After Missing Q4 Profit Estimates

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India’s second-largest IT services firm on Thursday said it expects revenue growth of 4%-7% for the fiscal year ending March 2024, well below analysts’ expectations of 10.7% growth.

Bengaluru: After the IT services exporter’s gloomy revenue outlook revealed the impact of financial turbulence in important markets, the United States and Europe, Infosys Ltd shares fell over 15% on Monday and pulled equities of rivals.
With more than 25% of its revenue coming from just the U.S. and European banking, financial, services, and insurance sectors, Infosys’ prediction came in the wake of a dismal quarterly report from larger competitor Tata Consultancy Services.

Due to the financial ecosystem being jolted by the failure of two mid-sized U.S. institutions in March, the government made an unprecedented effort to reassure depositors and support the system.

The Nifty IT index fell as much as 7.6% as Infosys had its worst intraday percentage decrease since October 2019. Infosys also pulled other IT companies down.

The second-largest IT services company in India announced on Thursday that it anticipates revenue growth of 4% to 7% for the fiscal year ending in March 2024, far less than analysts’ forecasts of 10.7% growth as a result of clients delaying purchases due to escalating recessionary worries. Previously, fiscal 2018 had a gain of 5.8%, which was the smallest growth.

Refinitiv IBES reports that the Bengaluru-based company’s net profit for the January-March quarter of 61.28 billion rupees ($748.21 million) fell short of analysts’ forecasts of 66.24 billion rupees.

Infosys share fall contributes 500 pts to Sensex’s 1,000-point selloff; other reasons behind the market decline

Infosys alone contributed over 500 points to the Sensex fall. Shares of TCS (70 points), HCL Technologies (32 points), Tech Mahindra (32 points) and Wipro (12 points) also contributed negatively to the index.

Given that the major indices had increased for nine straight days, market stabilisation was expected; nonetheless, a selloff in Infosys, an index heavyweight, significantly weighed down benchmark indexes on Monday. Early trading saw a loss of up to 989 points on the BSE Sensex. The last time it traded, it was down 643.40 points, or 1.06 per cent, at 59,787.60. Nifty fell below the 17,600 mark before closing at 17,663.75, down 164.25 points or 0.92 percent.

The BSE market capitalization decreased on Thursday from Rs 2,65,93,889 crore to Rs 2,64,60,214 crore, with six equities declining for every five that increased during intraday trades. These are the elements causing the market to decline.

Infosys drags IT pack lower

Over 500 points of the Sensex decline were attributable to Infosys alone. The index was also severely impacted by the shares of TCS (70 points), HCL Technologies (32 points), Tech Mahindra (32 points), and Wipro (12 points). The most severely impacted Sensex stock was Infosys, whose shares plunged 13%. Other notable declines in the 30-pack index were Tech Mahindra (down 5%), HCL Technologies (down 3%), Wipro (down 2.6%), and TCS (down 2.35%).

The reduced FY24 projection, according to Nuvama, is a sign of the overall weak macroeconomic, which might keep Infosys – and other IT companies – under pressure in the short term. Nuvama stated that the Q4 numbers were disappointing.

Aggressive Fed, firm dollar

Futures indicated that market expectations for a further 25 basis point (bps) hike at the Federal Reserve’s May 2-3 meeting increased to 81 per cent, with markets now anticipating less than 60 bps in rate reductions in the second half of the year, according to a Reuters article. Fears of a rate hike increased after the dollar recovered from a one-year low on Monday as a result of solid core US retail sales figures, an anticipated increase in short-term inflation forecasts, and outstanding Wall Street bank earnings.