Mumbai: Sluggish quarterly growth reported by India’s largest software company by sales, Tata Consultancy Services Ltd (TCS) on Monday triggered a dumping of IT stocks in Tuesday’s trade, pulling down the IT index on the Bombay Stock Exchange by more than 4.2%.
On a day when the exchange’s benchmark index, the Sensex, gained 0.27% to close at 16,783.87, TCS shares closed down 10.7% at Rs886.
Other large IT stocks also slumped. Wipro Ltd and Satyam Computer Services Ltd, India’s third and fourth largest software exporters, respectively, lost more than 5% each. HCL Technologies Ltd fell about 4%, while software bellwether stock Infosys Technologies Ltd declined 2.8%.
“TCS’ low performance indicated the first real impact of the US recession on a large Indian IT company,” said Harshad Deshpande, an IT sector analyst with Mumbai-based First Global Securities Pvt. Ltd.
TCS’ quarterly results missed expectations by a mile.
Govind Agarwal, IT analyst at UBS Securities India Pvt. Ltd, had predicted 21% growth in revenues and 16% in profits for the quarter, on a year-on-year basis, as did most other analysts. However, TCS posted 18% growth in revenues and a 4.15% growth in net profit.
Domestic brokerage India Infoline Ltd on Tuesday downgraded TCS to “sell” with a one-year price target of Rs800.
Foreign brokerage CLSA Asia-Pacific Markets’ Bhavtosh Vajpayee also downgraded TCS, with a Rs845 price target.
Wipro also failed to deliver in line with expectations as it reported an 11% growth in profit for the fourth quarter. Satyam lowered its earnings forecast for fiscal 2009, which according to its chairman B. Ramalinga Raju, was “keeping in view the implications of slowdown in the US economy”.
Nimesh Mistry, IT analyst at MF Global Sify Securities India Pvt. Ltd, said TCS had closed “some of its fixed price projects without realization”.
However, TCS could see strong growth in the second quarter of fiscal 2009, as most payments of this “free ramp-up” is expected then, he said.
Apart from Mistry, Surendra Goyal of Citigroup Global Markets and Merrill Lynch’s Mitali Ghosh issued ‘buy’ calls on TCS, with a 12-month target price of Rs1,100 or more.