IT nightmare on loop, Accenture's 20% fall highlights AI disruption
Mumbai: Indian technology stocks slumped Friday, with the gauge representing the bellwethers losing more than 6% during the day and closed 3.7% lower, after the
Mumbai: Indian technology stocks slumped Friday, with the gauge representing the bellwethers losing more than 6% during the day and closed 3.7% lower, after the world's biggest outsourcing company by market value, Accenture, slumped 20% on revenue forecasts and order bookings that trailed Wall Street expectations.Battered by AI-spawned disruptions, Accenture has now lost nearly 50% in a year, putting a question mark on the sustainable competitive advantage of the Indian-listed pureplay that had hitherto relied largely on outsourcing-led cost arbitrage to build a $280-billion industry over the past three decades. For Accenture, which often provides the cue for India's outsourcing industry, its initial 20% loss Thursday was the worst in its trading history.The Nifty IT index slumped as much as 6.4% during the day and closed at 27,426.85-the lowest level since May 14.
The Nifty declined 0.6%. Infosys slumped 6.5% while Tata Consultancy Services (TCS) lost 3.1%.131869349Accenture's guidance and circumspect commentary triggered the sell-off for the second straight day. Battered valuations limit downside in these stocks, analysts believe, but lack of clarity on growth in a world powered by AI offers restricted scope for upside, too."Most of the negatives are priced in and the valuations are now at a discount to Nifty valuations," said Sunny Agrawal, analyst at SBI Securities. "So, stocks are expected to stabilise but the growth outlook remains hazy."Large-cap IT companies guided for tepid growth of 2-5% while midcaps like Coforge, Persistent Systems expect low double-digit growth, he said.All constituents of the IT index declined except Oracle Financial Services Software that bucked the weak trend and gained 2.9%.
LTM dropped 4%, while Mphasis slipped 2.9% lower. Tech Mahindra, HCL Technologies, and Persistent Systems fell over 2% each.Accenture's guidance suggests the likelihood of further pain in the next couple of quarters as revenue revival has taken a backseat, said Ajit Mishra, SVP Research at Religare Broking."The Nifty IT Index is on the verge of retesting the 2023 lows of 26,300 from where it had rebounded to a record high of around 46,000 levels," he said. "If it fails to hold these levels then it can slide lower to 24,200-24,300 levels."Mishra said that the Infosys breached a major trendline on the monthly chart and a breakdown below ₹1,040 could confirm further breakdown.So far this year, the Nifty IT index plunged 27.6% while benchmark Nifty fell 8.1%."IT has lost investor favour due to likely AI led deflationary impact and uncertainty on growth from AI led offerings for clients," said Agrawal.
The BriefWire