IT Stocks Fall Over 3%, Sensex-Nifty Open 0.8% Lower
In the first quarter of the financial year 2023-24, several major IT firms in India faced challenges, with a decline in their employee headcount and a delay in salary hikes for employees.
HCLTech decided to postpone the compensation review for its employees by a quarter, and the senior management would not be receiving pay hikes this year.
Infosys, one of the top IT companies, reported a decrease of 6,940 employees in its workforce during the April-June period, resulting in a net downfall of 17,335 employees among the top four IT services companies. This was in stark contrast to the addition of 52,842 employees during the same period last year.
The CEO and MD of Infosys stated that the company would assess its hiring targets based on the demand environment and the outlook for the rest of the year.
Usually, Infosys announces salary hikes in April, but this year, the company was still evaluating increments. Employee costs increased by 13 per cent for the company over the year.
Other major IT players, such as TCS, Wipro, and HCLTech, also reported a slowdown in hiring compared to previous quarters and the same period the previous year. TCS, for example, added 523 employees in Q1FY24, while it had hired over 20,000 employees in Q1FY23.
The poor performance of IT stocks, including Infosys, resulted in a significant drop in share prices. Infosys’ share price plunged almost 10 per cent after the company reported weak Q1 earnings and reduced its guidance for FY24. The overall Nifty IT index also fell over 4 per cent.
In the June quarter, Infosys’ revenue growth was the weakest since FY21, leading to a revision of its FY24 revenue growth guidance to 1-3.5 per cent, down from the earlier projection of 4-7 per cent.
The IT sector stocks are facing challenges in Q1FY24. The IT index companies are experiencing a decline in employee numbers, delay in salary hikes, and reduced revenue growth projections, which are impacting their share prices.