Nifty IT Underperforms, HCL, Wipro, Tech Mahindra Close To 52 Week Low

Nifty IT index has turned out to be the laggard when compared to other sectoral indices. At around the time of writing this copy at 12:22 pm, the index traded weak by over 1 percent at 27,706. On a YTD basis, the index has slumped by over 28%.

Out of the 10 constituents of the index, all are trading in the red with the maximum fall seen in the stocks of L&T Technology, Mindtree and L&T Infotech, down up to 3%. The other stocks from the pack declining more than 1% include Coforge, Mphasis, Infosys and Tech Mahindra. Stocks like HCL Tech, Wipro and Tech Mahindra on the other hand are trading close to 52 week low.

Largely the fall in the pack has come after IT major Accenture reported third quarter earnings. Accenture reported its Q3 numbers (Augustending company). The overall revenue for the company grew 21.8% YoY to US$16.1 billion (bn) wherein outsourcing business (proxy to Indian IT companies, 44% of revenue mix) grew 18.7% YoY to US$7.1 bn while consulting business grew 24.4% YoY to
US$9.0 bn. New bookings (net new order book) were at US$7.8 bn for the quarter for outsourcing business, grew 6.7% YoY. The company's net adds (billable) were at 10,000 for the quarter, taking its global billable headcount to 671,000. Geography wise, North America market ( 47% of revenue mix) continues to be the growth driver as it grew 22.8% YoY for the quarter while Europe and
growth markets reported growth of 20.2% and 22.3% YoY, respectively. Utilisation declined 100 bps QoQ to 91% while attrition
increased 200 bps QoQ to 20% for the

quarter.

In the view of ICICI Direct, "The new bookings reported growth for the quarter but we observed a deceleration in new bookings for outsourcing business, especially in the last two quarters. Historically, we have seen their correlation with revenues with some lag effect. Unlessnew bookings pace picks up , we may witness revenue growth slowing down YoY, going forward. Geographically, on
overall revenues (consulting + outsourcing), we have been witnessing some downward trend. Accenture reiterates that it continues to gain marketshare. We believe that outsourcing revenue slowdown and market share gain for Accenture is not a good news for
Indian IT companies, which may also witness slower revenue growth from H2FY23 onwards due to possible tech spending cut from some its large clients in US and Europe. IT companies were also hoping for pricing led benefit in the past, which seems to be a missed opportunity now"