On Friday, the shares of Infosys, India’s second-largest software exporter, experienced a significant decline, dropping as much as 10%. This decline was triggered by the company’s decision to cut its full-year revenue growth outlook in half and its lower-than-expected first-quarter profit.
The company revised its revenue guidance from 4%-7% on a constant currency basis to a narrower range of 1%-3.5%. As a result, the stock experienced its most substantial drop since April 17, contributing to losses in the benchmark Nifty 50 index. The CEO of Infosys, Salil Parekh, attributed this revision to delays in decision-making by clients, while Indian IT service providers faced additional challenges due to reduced discretionary spending from clients amid global inflation pressure and recession concerns.
PhillipCapital Institutional Equity Research commented that the guidance cut reflects the challenging macroeconomic environment and its impact on IT services spending in the short term. Consequently, they downgraded their rating of Infosys’ stock from “buy” to “neutral,” setting a price target of 1,390 rupees. Additionally, other players in the IT sector, like Tata Consultancy Services, HCLTech, and Wipro, have also reported and projected muted growth, indicating the prevailing uncertain demand environment.
JM Financial remarked that Infosys’ management was overly optimistic in their earlier guidance of 4%-7%, and the revision represents a course correction rather than a sign of worsening demand conditions.
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