The Indian information technology sector has witnessed a broad wave of downgrades in the companies' earnings per share since the beginning of the earnings season.
Since the announcement of the financial results by Tata Consultancy Services Ltd. on July 11, most companies in the NSE Nifty IT have experienced reductions in the 12-month forward EPS estimates, painting a cautious picture for investors.
L&T Technology Services Ltd. led the downgrades with a 2% slash, followed by HCL Technologies Ltd. and LTIMindtree Ltd. with downgrades of 1.1% and 0.9% respectively, according to data from Bloomberg. Even major players like Wipro Ltd. and Persistent Systems Ltd. were not spared, with downgrades of 0.3% and 0.2%.
Index constituents Coforge Ltd., Mphasis Ltd. and Tech Mahindra Ltd. saw no change in the EPS estimates, indicating a neutral outlook. This can be attributed to the fact that the companies have not announced the earnings for the June quarter yet.
However, amid the general trend of downgrades, industry bellwether Infosys emerged as a standout performer. The company's 12-month forward EPS was upgraded by a substantial 19.3%, a significant positive divergence from its peers. This upgrade can be attributed to strong quarterly performance and the fact that the company lifted its revenue guidance for the current financial year to 3–4% when analysts were expecting it to be maintained at 1–3%. TCS also managed a minor upgrade of 0.1%.
The overall Nifty IT saw a modest upgrade of 3.2% in its 12-month forward EPS. This positive change, however, is largely driven by Infosys' remarkable upgrade. Without Infosys' contribution, the index would have likely experienced a downgrade, reflecting the broader struggles within the sector.
In fact, analysts already see Infosys as the best strategy to play the revival in the Indian technology space following the guidance upgrade and positive first-quarter earnings.
While Infosys' robust performance has cushioned the index overall, the widespread downgrades signal caution for the sector's near-term outlook.
Investors will be keenly watching upcoming earnings of Coforge, Mphasis and Tech Mahindra this week to gauge the sector's growth trajectory.
RECOMMENDED FOR YOU
Rupee Closes Flat After Opening At Record Low Against Dollar
Nov 14, 2024
Post Office FD Interest Rates: Rs 2 Lakh Investment Will Grow Into This Amount In Five Years
Nov 04, 2024
Indian Poultry Industry Poised For Recovery; Margins To Expand By 180- 20 Basis Points: CareEdge Analysis
Oct 29, 2024
Bajaj Finance Gets A 'Hold' Rating From Nirmal Bang After Its Q2 Results, Here's Why
Oct 24, 2024
POPULAR