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The IT sector’s losses widened in the market today after global investment bank UBS pressed the 'sell' button in the Infosys counter after downgrading the stock by 32 per cent from the current market price.
The CNX IT index, which was down by about 170 points around noon, widened its losses to nearly 250 points by 2.15 p.m. with 16 of the 20 stocks in the IT index reeling in the red, with Infosys being the biggest loser.
In fact, the intensity of selling it witnessed could be gauged from the fact that between 12 noon and 2.10 p.m., the turnover in the counter doubled from Rs 204 crore to Rs 410 crore.
Target price slashed
Media reports quoting UBS AG said that the investment bank had downgraded Infosys to sell, slashing its target price by 32 per cent to Rs 2,750, on the ground that the turnaround of the IT company could take more time than previously estimated.
It also felt that the infrastructure services and business process outsourcing businesses would drive the business growth of the IT companies, sectors from which Infosys earned less than its rivals like TCS or HCL Tech. Moreover, the high attrition rate and the company’s preference to shore up margins at the cost of revenue and market share were the other reasons for UBS’ decision.
The comments of UBS on Infosys had a significant impact on the stock which has lost Rs 108.15 to trade at Rs 3,057 on the NSE by 2.15 p.m.
Opening at Rs 3,151, Infosys shares touched a high of Rs 3,170 but withered under selling pressure with the trading turnover in the counter topping Rs 410 crore, the highest among the 20 CNX IT stocks, by 2.10 p.m.
Infosys effect
Other major IT stocks HCL Tech, TCS, Tech Mahindra and Wipro also wilted under the Infosys effect, though their losses were comparatively less. TCS was down by Rs 48.30 to Rs 2,150.60, Tech Mahindra shed Rs 49.55 to trade at Rs 1751.85 and HCL Tech lost Rs 48 to slip to Rs 1334.55. Wipro was trading at a marginal loss of Rs 12.35 at Rs 502.50.
Trading was very heavy in the top IT stocks with TCS witnessing trading of Rs 264 crore, Wipro Rs 132 crore and HCL Tech Rs 114 crore. Tech Mahindra saw a turnover of Rs 77.90 crore. The CNX IT index was down by 248 points.
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