TCS says US financial clients delaying spending, shares tank
Terming the customer outlook as one marked by "abundant caution", the country's largest software services firm TCS has warned that its financial sector clients in the US are holding back on discretionary spends, leading to a "sequential loss of momentum".
New Delhi: Terming the customer outlook as one marked by "abundant caution", the country's largest software services firm TCS has warned that its financial sector clients in the US are holding back on discretionary spends, leading to a "sequential loss of momentum".
"Based on data at the end of August 2016, the company has characterised customer outlook as one marked by abundant caution, with some holding back of discretionary spending - particularly in the BFSI vertical in the US, resulting in a sequential loss of momentum," TCS said.
The cautionary note sent shares of TCS plunging as much as 6.5 per cent during the day on BSE, wiping out Rs 31,527 crore from its market valuation.
The stock was the worst performer among the bluechips on both Sensex and Nifty components.
The US is the biggest market for India's USD 150 billion software outsourcing sector, followed by Europe.
Last week, Bengaluru-based Mindtree had warned that its revenues in the second quarter are expected to be lower than the first quarter, a trend that market watchers feel is indicative of a "difficult" FY2016-17 for the Indian IT sector.
Mindtree had attributed the warning to cross-currency movements, project cancellations and slower ramp-ups in a few large clients across different verticals.
"Mindtrees warnings confirms our thesis of a difficult FY17 (and most likely H1FY18) for the sector as a whole," Emkay had said and added that it continues to "see downside risks to overall industry growth".
Other larger companies Infosys and Wipro, that disappointed the street with muted first quarter numbers, had said they were facing unanticipated headwinds and slower project ramp-ups in large deals.
However, industry body Nasscom has so far maintained that there is no immediate reason to revise forecast of 10-12 per cent revenue growth in IT exports for FY17.