In intraday trade on Monday, shares of information technology (IT) companies fell up to 6% on the National Stock Exchange (NSE) after US Federal Reserve Chairman Jerome Powell stated that higher inflation is likely to hurt households and businesses.
At 09:23 a.m., the Nifty IT index was the biggest loser among sectoral indices, down 4.5 percent, compared to a 2% drop in the Nifty 50. Meanwhile, the index has fallen 10% in the last eight days, compared to a 4% drop in the Nifty 50 index.
In today’s intraday trade, shares of Tech Mahindra, Infosys, Tata Consultancy Services (TCS), Mindtree, Larsen & Toubro Infotech, Coforge, HCL Technologies, Wipro, and L&T Technology Services fell up to 6%.
The April-June quarter (Q1FY23) saw an increase in execution for IT firms because it is the first full quarter of execution (barring company-specific seasonality) following the full/partial impact of furlough in Q3 and Q4. Operating margins, on the other hand, were impacted by wage hikes implemented in the quarter for a few companies, while for others, supply side challenges, an increase in subcontractor expenses, and travel and visa-related expenses acted as major headwinds.
Despite minor pain in certain IT company verticals, analysts at ICICI Securities are confident that revenue growth guidance for FY23 will not be revised downward.
On the contrary, the Economic Times reported that a drop in the growth rate of three platforms – Amazon Web Services, Microsoft Azure, and Google Cloud – could reduce IT service providers’ revenue by up to 33%. The three platforms reported a 7% drop in incremental revenues in the first half of 2022.
