Infosys — the software giant which has guided for lowball revenue growth of 4-7 per cent in 2023-24 — was battered to a 52-week low of Rs 1,219 as investors seemed to panic about the future for technology giants at a time well-known commentators such as Nouriel Roubini and Hank Paulson have been raising the spook of recession in the US later this year.
Intense selling in Infosys and the HDFC twins pulled the benchmarks down: The 30-share BSE Sensex tanked 520.25 points or 0.86 per cent to settle at 59910.75.
During the day, it plunged 988.53 points or 1.63 per cent to 59442.47. The broader NSE Nifty fell 121.15 points or 0.68 per cent to finish at 17706.85.
Infosys’ market capitalization worth Rs 73,000 crore was wiped out in the morning when the stock fell close to 15 per cent. Late afternoon, it recovered a bit but was still 9 per cent down from Friday’s close.
It closed at Rs 1,258.10, down Rs 130.50, or 9.40 per cent from close Friday.
The market is reacting violently as several brokerages downgraded Infosys after its fourth quarter results disappointed the Street, and cut its target price.
JP Morgan has lowered the stock to “underweight” and cut its target price to Rs 1,200 from Rs 1,500 a share. CLSA cut its target price to Rs 1,550 from Rs 1,800, Citi kept its target price to Rs 1,400 from Rs 1,675 a share, Nomura Research target price was at Rs 1,290 from Rs 1,660, while BoFa cut its target price to Rs 1,390.
HDFC Bank — the other big heavyweight in the Sensex — has also come under pressure after a reasonably strong set of Q4 results. Concerns are spilling over ahead of its merger with mortgage financier HDFC as it waits for requisite regulatory and court approvals.
HDFC Bank Ltd is hoping to complete its merger with Housing Development Finance Corporation Ltd. by July. “We think, from a timing point of view, it is June or July, possibly in July, which is where we think the timeframe is as we speak, given where we are on various things,” HDFC Bank’s chief financial officer Srinivasan Vaidyanathan told analysts on Saturday after announcing the lender’s January-March results on Saturday.
The HDFC Bank stock fell 1.55 per cent or Rs 26.25 to Rs 1,667.05 on the BSE.
Shares of cigarette-to-hotel major ITC crossed Rs 400-level and hit a 52-week high of Rs 400.20. The stock rose 1.2 per cent in Monday’s trade on the BSE.The index heavyweight has been the top performer, rising over 48 per cent in the last one year. It has surged over 20 per cent year-to-date.
Weak outlook
The gloom-and-doom forecasts from the US are also hurting technology companies which typically earn about 40 per cent of their revenues from the US. A slide into recession is expected to badly crimp discretionary tech spending in the US, impacting companies such as Infosys, TCS and HCL Tech.
Hank Paulson, former US treasury secretary during the Bush presidency and named as the pointman to navigate the US out of the global financial crisis in 2008, said in an interview with FT last week: “I think it’s pretty likely we will see a recession,” quickly adding that “it will take a while to manifest itself”.
Earlier, Roubini — well-known economist and emeritus professor at New York’s Stern School of Business who earned the moniker of Dr Doom because he correctly foretold the credit crisis in 2008 — predicted a severe recession in the US this year.
“We kicked the can down the road. We bailed out and backstopped a lot of people. But now the game is over because you have inflation and you have to raise interest rates… so that’s where the risk of the mother of all debt crises occurs,” Roubini has said.
