Infosys, the No.2 Indian software exporter, trimmed its full-year revenue growth outlook for a second straight time and warned of lower client spending due to the debt crisis in Europe, sending its shares down nearly 8% to their lowest in more than a month.
India's $76 billion software services sector is bracing for a slower pace of outsourcing contracts as its clients put off new investments due to the troubles in Europe, Infosys's second-biggest market.
Bangalore-based Infosys, which has seen business sentiment worsening "marginally" since November, forecast dollar revenue growth of 16.4% for the fiscal year to March 31, down from 17.1% to 19.1% projected in October.
"Customers are very cautious...We believe that cautiousness will remain for sometime. The Europe recovery is not in sight and it's going to take a longer time."
The company beat market forecasts with a 33% rise in its third-quarter profit as a weak rupee boosted margins.
"Its prospect might not be as good as it has been over the last few years," said Michael Huang, manager of Yuanta India Fund, which owns Infosys shares, at Yuanta Securities Investment Trust in Taipei.
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"But in the longer term, this is a company that has a solid track record of its management and financial quality."
Infosys, whose outlook and management comments are seen as a barometer for the sector's health, also dragged down its local peers with sector leader TCS and third-ranked Wipro falling more than 5% and 4%, respectively.
"The reduction in its dollar revenue guidance is a matter of concern," said Dhananjay Mishra, an analyst with brokerage Sushil Finance in Mumbai.
Global spending on information technology will rise at the slowest pace in three years in 2012 as Europeans, worried about the region's sovereign debt crisis, are cutting back on investments, research firm Gartner Inc said last week.
Gartner predicted global IT spending would rise 3.7% in 2012, down from its earlier estimate of 4.6%. The forecast for Western Europe was slashed to a 0.7% drop in spending from a previously expected rise of 3.4%.
India's export-driven IT services industry competes with Accenture Plc and IBM for orders to maintain information technology infrastructure and build software applications.
More than half of Infosys's revenue is generated from the United States.