Infosys' free fall pulls Sensex below 60,000
Indian equity indices witnessed a sharp decline on Tuesday, led by a heavy sell-off in the technology sector, with Infosys being the top drag on the benchmark indices. The BSE Sensex plunged 714 points or 1.18% to close at 59,839.35, while the Nifty 50 index slipped 206 points or 1.14% to end at 17,887.45.
Key highlights
Infosys was the top loser among the Sensex constituents, with its shares plunging 9.82% to close at Rs. 1,435.95. The IT major's disappointing quarterly results, along with weak revenue guidance, spooked investors and dragged down the entire IT sector.
The sell-off in the technology sector also dragged down the Nifty IT index, which tumbled 6.54% to close at 35,237.05. Other IT majors such as TCS, Wipro, HCL Tech, and Tech Mahindra also closed lower by 2-6% each.
Meanwhile, the Nifty Bank index was the only sectoral index that managed to end in the green, closing up 0.17%. ICICI Bank, Kotak Mahindra Bank, and HDFC Bank were among the top gainers in the banking sector.
In terms of market capitalization, Infosys lost over Rs. 90,000 crores in a single day, while TCS and Wipro shed Rs. 49,013 crores and Rs. 9,341 crore, respectively.
On the global front, Asian markets traded mixed on Tuesday, with Japan's Nikkei 225 index falling 0.73% and China's Shanghai Composite index rising 0.54%. In the US, the S&P 500 index and the Nasdaq Composite index closed higher on Monday, boosted by strong earnings from major banks.
Analysis
The sharp decline in Infosys' stock price comes after the IT major reported its quarterly earnings on Monday. The company's net profit for the December quarter fell 2.7% sequentially to Rs. 5,860 crore, missing street estimates, while its revenue rose 0.5% to Rs. 26,790 crores. Moreover, the company's revenue guidance for FY22 fell short of market expectations, adding to the negative sentiment.
The sell-off in the technology sector can be attributed to concerns over rising inflation and interest rates, which could lead to a slowdown in the sector's growth prospects. Moreover, the recent surge in COVID-19 cases globally has also raised concerns over a possible economic slowdown, further denting investor sentiment.
Meanwhile, the banking sector managed to hold its ground, with gains in key banking stocks offsetting the losses in the IT sector. However, analysts warn that the sector could face headwinds in the coming days, as rising inflation and interest rates could lead to a slowdown in loan growth and affect banks' profitability.
In conclusion, the sharp decline in Infosys' stock price and the sell-off in the technology sector has weighed on the Indian equity market, with the benchmark indices slipping below key psychological levels. However, the banking sector managed to hold its ground, providing some support to the overall market. The coming days will be crucial in determining the market's direction, with investors closely watching key economic data releases and global market trends.
