Accenture's dismal Q3 adds to worries over Indian IT stocks

Mumbai: The cautious outlook for the information technology (IT) sector intensified at top brokerages after Accenture cut revenue growth guidance for its financial year ending August 31. Analysts said the lower earnings projections by Accenture is an indicator of growth moderation for Indian IT companies.

The Nifty IT index ended weak for the second straight day on Friday, down 0.9%. The benchmark Nifty declined 0.6%. Barring HCL Technologies, all the index constituents ended in the red with L&T Technology Services (-4.3%) the worst performer in the IT pack.

"Accenture's F3Q results (deceleration in revenue growth in F3Q-4Q, reduced order intake growth) and commentary around a dampening in small deals/projects confirm concerns of slowdown for India IT vendors," said Morgan Stanley in a note to clients.

Last week, JP Morgan had reiterated its bearish view on the Indian IT services sector citing demand deterioration and further cuts in consensus estimates. The brokerage placed IT giants Infosys, TCS, and Mphasis under its negative catalyst watch.

Jefferies said the three key takeaways for Indian IT firms from Accenture's results are sharp moderation in deal booking, pressure on pricing and muted outlook for North America and Communications vertical. That offers 'negative read-throughs' for LTI Mindtree, HCL, Infosys and TechMahindra.