The Indian market extended weakness to the fifth day as benchmarks Nifty50 and Sensex slumped to fresh 52-week lows on June 16.
The Nifty declined 331.55 points, or 2.11%, to end at 15,360.60, the lowest close since May 27, 2021. The Sensex dropped 1,045.60 points or 1.99% to close at 51,495.79, the lowest close since May 28, 2021.
The Nifty IT index also slipped to a 52-week low of 27,067.45 on Thursday. It has already lost one-third of its value year-to-date.
Since the start of 2022, the Nifty IT index has dropped 34%. The index has dropped approximately 12,203 points falling to 27,067.45 from 39,270 since Jan 2022.
The year 2021 was the best year for Nifty IT. The index increased by 59 per cent, owing to substantial earnings growth for IT companies as a result of digital transformation transactions in the United States and Europe.
Meanwhile, shares of Wipro have dropped 11% in the last five trading sessions from its previous closing high of ₹475.10 on June 9, 2022. The stock hit its 52-week low of ₹402.05 in Thursday's trade. The stock has corrected 45.39% from its 52-week high of Rs. 739.85, hit on October 14, 2021.
In the last one month, the stock has fallen 16%, underperforming the Nifty 50 index, which shed 3.32% in the same period.
Since Jan 2022, the stock has lost 42 per cent. The company commands an m-cap of Rs.2,41,332 crore.
For the quarter ended March 31, 2022, the company reported a 3.8% year-on-year increase in consolidated net profit at ₹3,087 crore. The company had reported a net profit of ₹2,972 crore in the year-ago period.
Net profit increased 3.9% sequentially from ₹2,969 crore in the previous quarter (Q3FY22).
The company closed 37 large deals in FY22, resulting in a TCV of large deals of US $2.3 bn. Customer count in >U$100 mn account moved from 11 to 19 and > US$50 mn account moved from 40 to 50 YoY in FY22.
Meanwhile, the Indian IT sector was hit by concerns over the recession, rate hikes, and downgrades from global brokerage firms.
Although IT companies are reporting strong order pipeline and deal wins, analysts are worried that the demand environment could change if the US economy hits recession.
Besides the US, the European market is also feared to be heading into a recession as the Ukraine-Russia war, soaring energy prices, and prospects of higher interest rates push the EU to the brink of a recession over the next two years.
The US Federal Reserve raised rates by 75 bps on Wednesday, which is its largest interest rate increase in more than a quarter of a century, to stem a surge in inflation.
The Fed also significantly cut its outlook for 2022 economic growth to 1.7 per cent, down from 2.8 per cent in March.
The US and UK markets are critical for Indian IT firms, accounting for 40-78 per cent of revenues for companies.
In the March quarter, Wipro revenues from the US and UK stood at 59.3% and 29.3%.
Further, global brokerage firm JP Morgan downgraded the Indian IT sector to underweight. It downgraded Wipro from neutral to underweight and cut the target price from Rs.520 to Rs.430.
Japan's global brokerage Nomura has also warned about the possibility of a potential slowdown in IT services demand in FY24. It downgraded Wipro from buy to neutral.
An average of 42 analysts polled by MintGenie have a 'HOLD' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
