Wipro’s shares dip, HCLTech shines as IT sector braces for slowdown: Report

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Shares of India’s Wipro Ltd fell over 5% on Thursday after it missed quarterly profit estimates and forecast weak revenue growth, while rival HCLTech saw a 3% rise as strong order wins led to upbeat growth outlook.

Bengaluru-based Wipro on Wednesday forecast third-quarter IT business revenue would rise 0.5%-2.0% sequentially, much slower than the 4.1% jump in the previous quarter, echoing larger rival Tata Consultancy Services Ltd’s warning of weakness in the next few months.

Wipro’s forecast for a soft revenue growth and a nine-quarter low net hiring reflects “rising uncertainty in demand,” Jefferies analyst Akshat Agarwal wrote in a note on Thursday, adding further wage increases would knock its margins.

The company’s September quarter employee count stood at 259,179, as against 258,574 at June end.

The industry, which saw demand sky-rocketing during the pandemic on the back of a global shift to cloud-based technology infrastructure, is bracing for an economic meltdown in major markets in the United States and Europe.

Big deal wins are increasingly becoming difficult to convert, industry experts said, sometimes giving companies that are able to keep costs in check and see better margins an edge.

Noida-based HCLTech raised its fiscal year 2023 constant currency revenue growth forecast to 13.5%-14.5% from 12% to 14%.

HCLTech’s “strong growth guidance and margin performance in an environment where demand for IT services is expected to be incrementally weaker, should help lower the valuation gap with larger IT services peers,” analysts at Motilal Oswal Financial Services said.

The Nifty IT index has lost more than a quarter of its value this year, as of last close. The Nifty IT index was down 1.03% at 0425 GMT on Thursday, dragging the Nifty 50, which was down 0.4%.

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