The guidance dragged down shares of other software services exporters with the BSE Information Technology (IT) index dropping nearly 3%. The Sensex and Nifty also declined 0.6% each.
Analysts said traders must refrain from building bullish bets on IT stocks as the sector may continue to see more pain over the next three months to one year due to bleak revenue growth prospects that may curtail tech budgets and IT spending.
“While we have a contrarian view, the IT sector is still not out of the woods,” said Gaurang Shah, senior vice president,
. “We expect the third and fourth quarters to be more painful. Besides, there is an overhang of a bearish trend in Nasdaq and US technology stocks.”
Shah advised investors with a short-term horizon to stay away from the sector. “But from a long-term perspective, IT is a bargain buying. Do not be in a hurry. Buy on dips and accumulate IT stocks at every 3-5% fall to build a portfolio.”
HCL Tech said the company may clock annual revenue growth at the lower end of its 13.5-14.5% guided range for fiscal 2023 citing macro-economic challenges in the demand environment.
“Some of the macros – like furloughs and drop in discretionary spending in tech, telecom and other verticals – are a little bit more than what we expected at the beginning of the quarter,” said C Vijaykumar, HCL Tech’s chief executive officer.
“We think it’s a December-phenomenon because of the furloughs… given the narrow band and macro feedback we have today, we will be at the lower-ends of our guidance for overall level at 13.5%-14.5% and 16-17 % growth in cc in services business,” he said.
The HCL Tech management’s comments sent the investors into a tizzy. More than 1.24 crore shares exchanged hands on the BSE and NSE on Friday compared to an average daily volume of about 28 lakh shares on both the exchanges.
shares fell 3.1%, Wpro declined 2.4% and weakened 1.7%.
Kotak Institutional Equities, which has retained a buy call on the stock with an unchanged fair value of ₹1,250, said HCL’s large deal engine is firing well with more opportunities, given the rising trend in vendor consolidation and cost efficiency focused deals. The brokerage also said HCL Tech’s margin profile can improve further with the easing of talent related headwinds.
.