Infosys shares fall, raising demand worries for Indian IT sector

BENGALURU (Reuters) -Shares of Infosys , India's No. 2 IT services provider, fell as much as 4.5% on Friday after a cut to the upper end of the company's annual revenue forecast fanned further worries of a delay in demand recovery in the sector.

The Bengaluru-based company's stock trimmed some losses to trade down 3%, but still weighed on the Nifty IT index which fell 0.7%, adding to a sharp 1.6% drop in the previous session.

Several analysts said the IT company's move to cut outlook for the second straight quarter was emblematic of near-term challenges for the $245-billion sector, with clients cutting discretionary spending after a pandemic boom. They do not see demand for IT services companies returning anytime soon.

"Conversion of existing orders into revenue is a problem for all IT companies since clients are delaying the execution of these orders," said Avinnash Gorakshakar, head of research at Profitmart Securities.

"U.S. and Europe are still not in a healthy shape, new order wins and their execution is not expected in the 6-8 months."

Larger rival TCS, which does not provide revenue outlook, missed second-quarter revenue estimates earlier this week, while HCLTech cut its revenue forecast. Wipro is due to report results next Wednesday.

"Infosys continues to grapple with unplanned ramp-downs and longer sales cycles for large deals. We expect this environment to continue throughout fiscal 2024," analysts at U.S.-based investment banking services company William Blair said.

Infosys said on Thursday it now sees full-year revenue growth at 1%-2.5%, excluding foreign exchange volatility, versus a prior view of 1%-3.5%.

Its second-quarter profit, at 62.12 billion rupees, also missed analysts' expectations of 62.95 billion rupees.

HCLTech, which initially dropped 1.2% in the session, reversed course to trade 2.8% higher.

HCLT's profit rose 9.8% and marginally beat analysts' estimates of 37.12 billion rupees, while revenue, at 266.72 billion rupees, fell short of analysts' expectations of 268.14 billion rupees.

(Reporting by Kashish Tandon in Bengaluru; Editing by Sohini Goswami and Nivedita Bhattacharjee)