IT stocks decline as Epam cuts its guidance

After Epam Systems again decreased its revenue forecast for CY2023, information technology stocks declined on Tuesday. Shares of Infosys decreased 1.8% while the NSE IT Index lost 1.88%. The yield on TCS shares was 1.6%.

EPAM has revised its forecast for revenue growth and now projects a 2% drop in constant currency revenues at the middle of the advised band. With this, the company has now decreased its forecast for sales growth in CY2023E over the course of two revisions by almost 13%.

The business has ascribed the delay to ongoing customer conservatism around “build” spends, a slower-than-expected rate of pipeline conversion, and a slight decrease in total pipeline, according to analysts at Kotak Institutional Equities (KIE).

A year-over-year sales increase is only anticipated in H1CY24, according to the business, which anticipates a recovery in discretionary spending to take two to four quarters. The downturn in discretionary expenditure will also have an impact on Indian IT, with 1QFY24 expected to be subpar, the KIE analysts added. The recent sector run-up, they said, “has been ahead of fundamentals.

The expansion of Indian IT is affected by consumer decision-making delays and spending cuts, they added. The authors stated, “Across companies in our coverage universe, we expect revenues in Q1FY24 to be weaker than in Q4FY23.” The financial services and technology sectors, according to them, have particularly negative demand environments.

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