By Indranil Sarkar and Manvi Pant
(Reuters) -Shares of India’s No. 2 software services exporter Infosys fell nearly 6% on Friday and were set for their biggest one-day decline since July 2023, as analysts raised concerns about the quality of earnings following its third-quarter report.
The stock was down 5.7% as of 11:49 a.m. IST, and was the top drag on the IT index and the benchmark Nifty 50, which declined 2.5% and 0.7% respectively.
Its U.S.-listed shares fell about 6% overnight.
Infosys on Thursday raised its annual revenue forecast for the third time this financial year as its U.S. banking and retail clients warmed up to spending more on discretionary projects, echoing Tata Consultancy Services and HCLTech.
However, analysts were concerned about the “quality” of the earnings report, which overshadowed the outlook.
The revenue growth was driven by a higher component of “third-party items” in Infosys’ deal pipeline, “which drove concerns around the quality of the beat and raise”, Morgan Stanley analysts said in a note.
“Given that the commentary on small deals pipeline is not showing any meaningful signs of inflection, we now assume the (industry-wide) recovery to be more gradual than before,” they said.
Small deals comprise more than two-thirds of the company’s total deal intake, according to BofA Global Research.
Markets are awaiting further evidence of uptick in discretionary spending, not just commentary from ITÂ companies, said Saurabh Jain, assistant vice president of retail equities research at SMC Global Securities.
Infosys shares gained 22.5% in 2024, outperforming TCS and LTIMindtree, but trailed behind HCLTech, which rose 31%.
(Reporting by Indranil Sarkar and Manvi Pant in Bengaluru, additional reporting by Anuran Sadhu; Editing by Mrigank Dhaniwala and Varun H K)
