Shares of Infosys fell 1 per cent to a six-month low of Rs 1,372 on the BSE in intra-day trade on Thursday as growth concerns weighed on investor sentiment. The stock of the information technology (IT) company was quoting lower for the fourth straight day, down 3.5 per cent during the period. It was trading near its 52-week low of Rs 1,355.50, touched on September 26, 2022.
In the last one month, Infosys has rallied 12 per cent in the market as analysts expect a stagnation or slowdown in digital/cloud programs due to cut in discretionary spending by customers in the near term. In comparison, the S&P BSE Sensex was down 2.4 per cent during the same period. Moreover, Infosys share price has fallen 27 per cent in the last one year against 1 per cent rise in the benchmark index.
“Caution among banking and financial services (BFS) firms in developed markets, following recent developments around the bankruptcy of Silvergate, SVB, and Signature Bank in the US and the UBS-Credit Suisse merger in Europe, will further reduce discretionary tech spending in the near term,” Kotak Institutional Equities said in a recent IT sector update.
This would potentially impact growth for Indian IT in H1FY24, and bring down overall growth for FY24. The brokerage firm said expenses will increase on cost take-out, but profit will be realized in H2FY24 or later.
“We expect the growth slowdown in FY24 to emerge in the form of a weak March 2023 quarter, followed by moderate growth in Q1FY24, and normalization in Q2FY24. The ongoing crisis in the banking sector, however, could impact sequential growth by 1- 2 per cent in Q1 FY24. This assumes a quick resolution to the global banking crisis and the remaining problems for BFS.
Meanwhile, analysts at Nirmal Bang Securities have widely divergent views on FY24. “We are assuming low- to mid-single-digit growth from both lower volumes as well as some price compression, while consensus is building in high single-digit growth indicating a soft landing in the US. We Expect tight IT spending by clients. Quite weak corporate revenue/profit picture (our base case) amid possibility of shallow recession in US in calendar year 23. TTM Net New Book TCV/Bill ratio for last five quarters ~24 % (does not include sub-US$50 million deals) and may moderate growth in FY24,” the brokerage said in its December quarter results update.
