IT shares trade weak; Wipro, TCS, HCL Tech down over 1%

Shares of frontline information technology (IT) companies were trading lower by more than 1% in late trades even as benchmark share indices recovered from their early morning lows.

Wipro (down 3% at Rs 539), Tech Mahindra (2.7% at Rs 508), HCL Technologies (1.5% at Rs 816) and Tata Consultancy Services (1.2% at Rs 2,367) were down more than 1% on the National Stock Exchange (NSE). Infosys was down 0.57% at Rs 1,057.

At 03:09 p.m. Nifty IT, gauge of technology shares index, was down 1.3% as compared to 0.47% decline in the Nifty 50 index.

IT companies will kick start their Q3FY (October-December) quarter results from current week. The sector giant Tata Consultancy Services (TCS) will unveil its numbers on January 12, while Infosys will release its on January 14.

Q3, traditionally, has been a seasonally weak quarter with furloughs impacting the manufacturing verticals the most. TCS and Wipro have issued revenue warnings due to the Chennai floods.

TCS had said it is expecting a substantial impact on the company's revenues in the seasonally weak third quarter ending December 31, 2015 owing to the recent Chennai rains.

“The company said attendance rates were lower than normal as employees were still recovering from the flood's aftermath. This is expected to have a material impact on the company’s revenues in the seasonally weak third quarter ending December 31, 2015,” TCS said in December 11, 2015.

Wipro on December 16 said for the quarter ending December 31, 2015, the incident is expected to have a material impact on the revenues and will result in higher one-time cost incurred towards deployment of our business continuity plan.

Both these factors will impact our operating margins for the quarter. Revenues from our IT Services business are expected to be in the previously communicated range of $ 1,841 million to $ 1,878 million. However, we expect revenues to be in the lower half of the guidance range, it added.

Edelweiss Securities anticipate Q3FY16 revenue growth to be impacted by the floods in Chennai, where many companies have a large presence, along with seasonal impact of furloughs.

Q3FY16 for IT sector will be muted due to seasonal weakness on furloughs and Chennai floods, according to Axis Capital.

Cross currency will adversely impact USD revenue growth by 30-60 bps quarter on quarter (QoQ). These coupled with salary hikes (in some cases) will impact Q3 margins by 50-125 bps QoQ, the broking firm said in a results preview.

 


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