Infosys hits 52-week low, slips 14% in one month amid growth worries

Shares of Infosys hit a 52-week low at Rs 1,360.15, down 1 per cent on the National Stock Exchange (NSE) in Thursday’s intra-day trade. The stock has dropped 14 per cent so far in the last one month amid growth concerns. In comparison, the S&P BSE Sensex was down less than one per cent during the same period.

The stock of information technology (IT) major fgell below its previous 52-week low of Rs 1,367.20 touched on June 17, 2022. The stock now quotes at its lowest level since May 2021.

On Wednesday, the US markets ended lower, dragged by IT stocks, after the US Federal Reserve announced another 75 bps rate hike. Back home, In India, IT stocks also traded lower on Thursday on the back of weak global cues as investors digested another rate hike by the Fed and its commitment to keep up increases into 2023 to fight red-hot inflation.

At 09:35 am, the Nifty IT index, one of the top losers among sectoral indices, was down 0.50 per cent at 26,710, as compared to 0.20 per cent decline in the Nifty 50. The IT index hit an intra-day low of 26,552 and traded close to its 52-week low of 26,189 on the NSE. Besides Infosys, Wipro and HCL Technologies were down a per cent each.

In the April-June quarter (Q1FY23), operating margins of most of the IT companies were dented due to wage hikes rolled out in the quarter, supply side challenges, increase in sub-contractor expenses, and travel & visa related expenses.

The companies also mention about weakness in a few pockets as far as tech spending is concerned due to some impact of macro headwinds. The weakness largely pertains to banking, financial services and insurance (BFSI) and retail verticals. Meanwhile, BFSI, the largest revenue driver for most Indian IT companies, was in the range of 16.7-53.4 per cent in Q1FY23.

“Infosys has retained FY23 EBITM guidance at 21-23 per cent, but expects it to be at the lower end of the guided range, considering Q1 performance and cost woes. Optimization in subcontracting costs, higher utilization, automation, pyramid rationalization, pricing, and cost efficiencies remain the key margin levers that gives management confidence about margin recovery in the next three quarters,” analysts at Emkay Global Financial Services had said in Q1 result update. However, the brokerage firm has cut FY23/FY24/FY25E EPS by 1.9 per cent/0.1 per cent/0.1 per cent, factoring in the Q1 performance. The margin miss should lead to our/consensus earnings downgrades, though revenue beat estimates, it said.

“An economic slowdown or other factors may affect the economic health of the United States, the United Kingdom, the European Union (EU), Australia or those industries where our revenues are concentrated. Our clients may operate in sectors which are adversely impacted by climate change, which could consequently impact our business and reputation,” Infosys said in FY22 annual report.