TCS Q4 miss sends Infosys, HCL Technologies, Wipro and Tech Mahindra shares tumbling. Here's why

A soft quarterly results by TCS sent shares of peer IT companies including Infosys, HCL Technologies tumbling in Thursday’s trade, as concerns mount over s lack of visibility on orders in the near term. TCS’ March quarter results were a miss on both revenues and margin and while quarterly order wins were in line with expectations, cautious clients in a few verticals raise concerns over growth in the next few quarters.

Infosys, whose March quarter results are due later today, fell 2.09 per cent to hit a sub-Rs 1,400 level, as TCS' constant currency (CC) revenue growth of 0.6 per cent and EBIT margin of 24.5 per cent came in lower than consensus estimate of 0.09 per cent and 25 per cent, respectively. It hit a low of Rs 1,398.50 so far.

Read more: Infosys Q4 results at 3.45 pm today: Press conference, earnings call timing, analyst preview & dividend history

The very fact that TCS' total contract value for FY23 came in a tad lower than that of FY22 does indicate incremental growth slowdown, said Nirmal Bang Institutional Equities.

"We have an explicit view of a shallow recession in the US in 2023 and hence our near-term cautious view," Nirmal Bang said adding that the Street might be overestimating industry growth by 300-400 basis points.

TCS results suggested that the BFSI clients remain in cash preservation mode, especially after recent volatility in financial markets. The TCS management noted that certain discretionary projects are being deferred or put on hold as clients prioritise those projects which have upfront cost savings, Nomura India said.

Kotak Institutional Equities said it expects a subdued demand outlook on near-term tech spending. Recent events in the US regional banks have induced greater caution on spending by a broader set of industries, more so in the US, it said.

Shares of HCL Tech fell 2.21 per cent to Rs 1,070.40. Wipro declined 1.28 per cent to Rs 367.35. Tech Mahindra was down 2.17 per cent to Rs 1,086.

"Mediocre Q4 results and uninspiring commentary from TCS will keep the IT stocks soft, said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Read more: Infosys Q4 results, dividend on April 13: Earnings preview, guidance, dividend history & more

Also read: TCS Q4 results, dividend: Profit jumps 15% to Rs 11,392 crore; Rs 24 dividend announced

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Also read: TCS shares at Rs 2,650 or Rs 3,900? IT stock sees price target cuts post soft Q4 results. What Nomura, others say