TCS earnings warning a symptom of Indian IT sector woes

On September 8th Tata Consultancy Services (TCS) shares dropped as much as 6.4 per cent after the Mumbai-based IT major said it is witnessing “sequential loss of momentum” in the key banking, financial services and insurance (BFSI) vertical. TCS shares, which closed 4.85 per cent lower at Rs 2,322, underperformed the broader Nifty that ended up 0.4 per cent.

tcsBFSI is TCS’ biggest vertical, accounting for over 40 per cent of revenues.

Other IT majors such as Infosys and Mindtree have also expressed concerns on earnings slowing down.

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.

India’s $150 billion IT sector has come under pressure because of weak growth in the US and Europe, which together account for 70-80 per cent revenues of big IT companies. This also led to a 2.49 per cent or 259.09 points fall in the BSE IT index.

All frontline IT stocks, including Tech Mahindra (-2.7 per cent), HCL Tech (-1.7 per cent), Infosys (-1.6 per cent) and Wipro (-1.6 per cent) closed lower, tracking the selloff in TCS. 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.

Related Links

TCS Adds To IT Sector Gloom, Shares Slump On Cautious Commentary

Lower Spends by US banks singe IT stocks


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