Infosys shares in freefall, drop 11%

Infosys' shares experienced a significant drop of almost 11% on Monday following the announcement of weaker-than-expected Q4 results last week. The disappointing quarterly results have underscored the impact of turmoil in the banking sector on major global markets. The company's stock plummeted by 10.74% at the BSE opening, resulting in a downward drag on its peers and domestic equities. This is the biggest intraday percentage drop since October 2019, with the stock being valued at Rs 1239.40 by 11 am. Along with its rival Tata Consultancy Services (TCS), Infosys' underwhelming results highlight the challenges faced by the IT sector. More than 25% of these companies' revenue is generated from the US and European banking, financial, services and insurance sector, according to Reuters.

The recent collapse of Silicon Valley Bank and Signature Bank in the US has contributed to the banking crisis in the country. In the March quarter of FY23, Infosys reported a consolidated net profit of Rs 6,128 crore, representing a 7.8% YoY increase, according to the announcement made on Thursday. It gave a 4-7% revenue growth forecast for FY24 amid macroeconomic uncertainties. The company also achieved a 16% YoY growth in consolidated revenue in Q4FY23 at Rs 37,441 crore. Kotak Institutional Equities, in a report on the IT sector's performance published on Monday, attributed the decline to a pause in discretionary programs and even cancellations. The report suggested that premium multiples were unlikely for stocks trading at elevated growth and margin assumptions, and advised investors to avoid such stocks.

According to a report on the IT sector's performance published on Monday by Kotak Institutional Equities, there was a slow start to projects in January, which led to pauses and cancellations in February and March. The report suggested that the banking crisis in US regional banks and European banks in March 2023 has heightened caution and may impact the June 2023 quarter. The report also indicated that weak US performance across companies reporting in the coming days would not be surprising.