TCS tumbles and drags down to Wipro, Infosys, Tech Mahindra and LTTS with poor earnings

• TCS was the biggest loser on Nifty 50 dragging the indices down with nearly 5% fall followed by other IT peers.
• Investors feared possible recession in the US after the IT giant reported poor earnings in the last three months.
• Further, the market participants will keep an eye for similar trends in results of other IT companies.

A lot of stock market hopes were pinned on corporate earnings this year, and TCS in particular. And, its profits that grew a modest 5% with added cost pressures have dragged down its share price along with that of the entire IT pack.

TCS shares were the biggest losers on Nifty 50, as its stock went down by around 4.47% in early morning trade. This only hardens the fears of a possible recession in the US which will lead to a slowdown in the domestic IT majors.

The stock of Wipro went down by 3%, HCL Tech by 2.62% and Tech Mahidra too went down by 2.28%.

However, even Infosys’ stock which is the mutual fund darling too went down by 2.49%, even though it has been rated as the best of the worst by many analysts.

“We anticipate Infosys to lead on the organic revenue front with growth of 4.3% on quarter in constant currency. Growth in TechM, Wipro and HCL is expected to be soft due to seasonal weakness and moderation in demand,” said a report by ICICI Securities, in an earnings preview.

While a strong Dollar could have been good news for IT companies, the cross-currency headwinds due to extreme volatility of all currencies is bound to have an impact on their earnings.
TCS’ profits rose by around 5% in the year on year comparison and on a quarterly basis, it fell by 5% to o ₹9,478 crore. This is on account of increased costs across streams — like travel expenses in addition to employee benefit costs.

The company said that it was a challenging quarter from a cost management perspective as it impacted their operating margin.

Moreover, the fact that the firm is cautious of global uncertainties also worried investors. CEO and MD Rajesh Gopinathan said, “Pipeline velocity and deal closures continue to be strong, but we remain vigilant given the macro-level uncertainties."

In addition, TCS’s attrition also continued to rise as the issue of number of employees leaving IT firms still persists. Its attrition rate has gone up to 19.7% from 17.4% last quarter.


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