IT stocks including Tata Consultancy Services, Infosys, HCL Technologies, and Coforge recovered during Monday's trading session on June 22, bouncing back from the previous session's sharp sell-off triggered by Accenture's weaker-than-expected guidance. According to reports from LSEG data, the rally was led by Coforge, with shares rising 2.85% intraday to ₹1,505 apiece, followed by Tech Mahindra with a 2.09% surge at ₹9,840 per share. Infosys gained 1.95% trading at ₹1,071.9, while TCS, HCL Technologies, and Mphasis rose over 1% to trade at ₹2,157, ₹1,148.7, and ₹2,307.1 respectively. However, Wipro remained in red, down 0.88% at ₹182.4. The Nifty IT index gained 1.3% to 27,785 on Monday, as reported by LSEG data, recovering from Friday's session when the sectoral index plunged to 26,634.50, the lowest level seen by the sectoral index since April 2023.
IT stocks also snapped a two-day fall as Anthropic CEO Dario Amodei warned that leading AI companies may need to generate hundreds of billions of dollars in revenue to justify their enormous capital expenditures, arguing that firms unable to reach that scale could face existential risks as AI infrastructure costs continue to soar. This development adds to the existing concerns around Accenture's weaker guidance and macro headwinds that have been weighing on the sector. The warning highlights the growing pressure on AI companies to demonstrate substantial revenue growth to justify their massive investments in AI infrastructure and development.
In a significant development, TD Cowen has downgraded Accenture from Buy to Hold and lowered its price target from $258 to $150, citing challenging growth estimates and macro headwinds. According to Investing.com, analyst Bryan Bergin stated that the case to buy has become more challenging as growth estimates get cut, with the firm noting that Accenture's financial profile absorbs high valuation product-driven acquisitions adding net leverage. The stock has plunged 22.6% over the past week and now trades at $127.98, hovering just above its 52-week low of $125.60. Year-to-date, shares have declined 51.6%, with TD Cowen questioning whether the third quarter will be a clearing event and anticipating the company's fiscal 2027 guidance will likely leave the starting point light. The firm expects 1-5% year-over-year constant currency growth while consensus sits at 4.4%, with Accenture's financial profile absorbing leverage for strategic acquisitions at higher valuations.
According to Harshal Dasani, Business Head at INVasset PMS, as reported by LSEG data, the rally in Indian IT stocks has been technical, driven by extreme short-term oversold conditions after the Accenture-led sell-off, position covering by funds that had run heavy underweights, and the typical post-correction sentiment reversal that follows any sharp drawdown. The recovery reflects investor confidence returning to the sector after the previous session's sharp decline. However, analysts caution that technical indicators remain weak, with key support and resistance levels suggesting markets need stabilisation before any sustained recovery can be expected. This comes as Indian IT companies derive a major portion of their revenue from the US economy, making them vulnerable to concerns around reduced discretionary spending on IT consulting and digital transformation projects. Anand James, Chief Market Strategist at Geojit Investments, noted that oscillators are turning lower but remains optimistic about an upmove, citing a hammer candle formation on Friday pointing to bulls gaining upper hand. The firm expects 24,300-600 points as the upside target with 23,800 as the downside marker.
According to HSBC, as reported by LSEG data, the weakness seems to be led more by geopolitical issues than concerns around AI-led productivity gains, noting that Indian IT companies continue to lack meaningful near-term catalysts, although sector valuations are now approaching trough levels. Jefferies stated that Accenture's revised revenue outlook could result in consensus estimate cuts across the IT sector, with the traditional IT services growth remaining under pressure, reflecting that India's top five IT companies continue to trade at a significant premium to Accenture. Analysts see valuations turning attractive but caution that volatility may persist, with the sector needing stabilisation before any sustained recovery can be expected. The sector faces additional challenges from structural fears around AI replacing traditional services and geopolitical headwinds, with analysts anticipating further moderation and a shift towards M&A and new client acquisition to counter slowing growth. TD Cowen noted that Accenture shares remain susceptible to AI headlines and selling pressure amid AI model advances as tech portfolio positioning continues to shift away from the group.
