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Mumbai: India’s top five technology companies on Thursday lost a combined 34,000 crore in market value after Tata Consultancy Services Ltd (TCS) warned about weakness in its key banking, financial services and insurance (BFSI) arm.

The industry leader said it was witnessing a “sequential loss of momentum" in the segment that accounts for almost 40% of its revenue after some of its customers cut back on discretionary spending. In a notice to the exchanges, the company characterized customer outlook as one marked by abundant caution. More clarity on its outlook is expected next week.

TCS lost nearly 24,797.87 crore in market capitalization, Infosys Ltd 3,927.76 crore, Wipro Ltd 2,078.27 crore, HCL Technologies Ltd 1,883.36 crore and Tech Mahindra Ltd 1,194.09 crore.

TCS is the second IT company to issue a warning about the current quarter. Earlier, Mindtree Ltd issued a profit warning and lowered its revenue guidance for the second quarter on account of project cancellations, cross-currency movements and slower ramp-up in a few large clients across different verticals.

ALSO READ | TCS marketing chief John Lenzen quits

“The US caution clearly reiterates our thesis that TCS, with huge dependence on H1 (the first half of the fiscal year), has very little margin of safety," said Edelweiss Securities Ltd in a note to clients. “On the positive side, though, Europe BFSI is doing well despite Brexit and management has maintained its commentary on rest of business/services verticals."

In fiscal year 2016, the BFSI exposure of TCS was 40.6%, the largest among the big five companies. For Infosys, this stood at 27.3%, Wipro 26.3%, HCL Tech 25.8% and Tech Mahindra 10%.

Given the weak management commentary, we expect TCS’s quarter-on-quarter revenue growth to slow down to 1-2% for the three months ended September, said Religare Institutional Research in a note to client on Thursday. In the June quarter, TCS revenue growth was 3.1% in constant currency terms.

Additionally, since the second half of the year is seasonally weaker, “we expect growth for FY17 to be in single digits", the note added. The brokerage firm reiterated its sell rating on the stock and reduced its price target by 5.8% to 2,300 a share.

The TCS stock fell 5.1% to 2,321.15 on BSE after falling as much as 6.54% earlier in the day, its steepest fall in almost a year.

Rivals Infosys fell 1.6% to 1,037.90 and Wipro Ltd lost 1.8% to close at 473.60. Similarly, HCL Technologies fell 1.7% to 773.55, Tech Mahindra Ltd lost 2.61% to close at 458.90.

Of the analysts covering TCS, 23 have a buy rating, 25 have a hold rating, while eight have a sell rating, shows Bloomberg data. A “large part of the business has shifted on to the SMAC (social, mobile, analytics and cloud) platform and obviously major businesses are moving to the social media analytical space and due to this we are likely to see some transformation or changes in India’s IT sector business," said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt. Ltd.

“There is no problem in the fundamentals of the India’s IT companies but they will see some pressure till they completely transform into the new business area," he added.

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