All of the top 15 losers on the Nifty 500 index this morning are IT stocks.
Infosys is now leading the losses among the IT names with a fall of close to 8%, while shares of Tech Mahindra and TCS are down 6% each.
Shares of Mphasis, HCLTech, LTM and Persistent Systems are down between 5% to 6%, while Coforge, Hexaware Tech, Sonata Software, Tata Elxsi, KPIT Tech are all down between 3% to 4%.
How Were Accenture’s Results?
For the full year, Accenture has narrowed its revenue growth guidance to 3% to 4% from 3% to 5% earlier in constant currency terms. The company maintained its operating and free cash flow outlook for the full year.
The company in its earnings call said that client budgets have not been increasing, even with AI, with spends being redeployed instead of expanding.
How Is Indian IT Impacted By Accenture Results?
A key highlight of Accenture’s results was the fact that its outsourcing bookings were down 15% from last year during the quarter, which means continued headwinds for Indian IT services.
Consulting demand also continues to remain weak for the company and discretionary spending too is not seeing any improvement.
How Should You Trade IT Stocks Today?
CLSA Still Finds Opportunities
Brokerage firm CLSA said that the guidance cut and soft managed services order book have more to do with the negative macro environment rather than AI, even as an increase in headcount was an encouraging sign.
CLSA wrote in its note that the sector is still alive with a lot of opportunities for ambitious managements, while companies more exposed to discretionary demand like Infosys and Wipro will be more impacted than stocks like HCLTech who are focusing on cost optimization.
Citi Cautious On Indian IT
The brokerage highlighted that the trailing 12-month bookings for Accenture were up 5% in US Dollar terms, while gross margins were down 10 basis points.
For Indian IT, Citi said that the IT index is trading at 16 times its estimated financial year 2027 earnings, and despite that, it remains cautious on the sector.
HSBC Sees A Negative Read Through For Indian IT
HSBC’s note stated that Accenture’s guidance cut signals continued soft demand environment, which is a negative read across Indian IT.
However, it clarified that the softness is due to disruptions in West Asia and not AI-led productivity pressures.
It went on to add that the Indian IT services companies continue to lack short-term triggers, even as their valuations are close to a “trough.”
Nomura’s Top IT Picks
The brokerage said that the West Asia disruptions are likely to have some effect on revenue and deal bookings in the first quarter of financial year 2027 as well, and that impact could spill over into the second quarter too, as it is not clear how quickly spending behavior will normalize, particularly in challenged sectors such as auto.
Nomura has reiterated its preference for Infosys and Cognizant among largecap IT companies, while Coforge and eClerx Services are the firm’s preferred midcap and smallcap picks respectively.
Jefferies Remains Underweight On IT
The brokerage wrote in its note that another downward revision by Accenture implies further growth moderation for Indian IT in the near-term.
“This may lead to further cuts to consensus earnings estimates for Indian IT, and may also raise concerns on longer-term growth outlook and PE multiples,” the firm’s note said.
Despite the 25% fall that the IT index has seen so far this year, Jefferies remains “underweight” on Indian IT as growth uncertainty persists amidst the AI pressures and a volatile macro.
Shares of Infosys and Wipro, which are listed in the US, ended with losses of 10% and 4% respectively overnight.
