Nifty IT index crashes over 4%; TCS, Infosys, LTI, LTTS plunge up to 6%

Global growth is expected to moderate from 6.1% in 2021 to 3.6% in 2022, driven by withdrawal of monetary accommodation in major economies, continued supply side shortages and economic damage from war

Shares of information technology (IT) companies were under pressure on Monday with the Nifty IT index falling over 4 per cent on concerns of moderation in growth due to lower global growth outlook.

At 01:52 PM, the Nifty IT index was trading as the top loser among sectoral indices, and was down 4.25 per cent. In comparison,the Nifty50 was down 3 per cent. The IT index had hit a 52-week low of 27,423.80 on May 25, 2022 after a slew of foreign brokerage firms downgraded the IT sector and cut their target multiples.

The Nifty IT index has corrected 29 per cent from its 52-week high level of 39,446 hit on January 4, 2022.

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Among individual stocks, Tata Consultancy Services (TCS), Infosys, Mindtree, Larsen & Toubro Infotech (LTI), L&T Technology Services (LTTS), Tech Mahindra and Coforge crashed between 5 per cent and 6 per cent on the NSE today.

IT companies saw some moderation in revenues in January-March quarter (Q4) in constant currency (CC) terms after witnessing strong growth in Q3. Tier I companies reported average constant currency growth of 19.9 per cent on YoY basis.

However, global growth is expected to moderate from 6.1 per cent in 2021 to 3.6 per cent in 2022, driven by withdrawal of monetary accommodation in major economies, continued supply side shortages and economic damage from the war in Ukraine.

"While enterprise spending on technology is expected to go up, growth is expected to moderate year on year at an industry level, leaving space for outperformance through market share gains and strong deal wins," IT major TCS said in its financial year 2021-22 (FY22) annual report.

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The company added: While the world and businesses are recovering from the impact of the Covid-19 pandemic of the last two years, new external and internal risk continue to challenge businesses in every possible way amplifying existing risks. Not only are the nature of risks evolving, but the speed of risk is increasing with faster time to impact. Geo-political situations like the Russia Ukraine war have further forced global businesses to revisit their operations, delivery, supply chains and contractual aspects.

Key themes expected to drive client spending, and continued business momentum for the company in FY 2023, include customer experience, product innovation, sustainability, technology and operations, it added.

"We are starting to see inflation across several markets in the world, interest rate increases, with the European conflict and continuing COVID-19 impact in some geographies creating supply chain constraints. While our demand outlook is strong, we remain vigilant to ensure we are agile and evolve our approach with the changing dynamics," Infosys said in FY22 annual report.