Shares of IT heavyweights Infosys, HCL Tech, Wipro and TCS saw declines on Friday morning after global peer Accenture cut its FY24 annual revenue guidance to 1-3% due to delayed decision-making and weak discretionary spends.

What Happened: The impact reverberated across all major IT stocks, with the Nifty IT index experiencing a 3% decline. Over the last month, the technology index has witnessed nearly a 9% correction due to subdued guidance provided by some global services peers for CY24.

Accenture’s results and outlook have reaffirmed the market’s anticipation of cautious near-term demand.

Analysts at Kotak Equities noted that Accenture’s hints of further cuts in short-cycle discretionary projects would be a negative for companies such as Wipro, LTIMindtree, Mphasis and Infosys, whose estimates factor in some recovery in discretionary spending.

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Noting the weak near-term demand, the brokerage expects large IT services companies to start FY2025 with cautious guidance.

Nomura analysts also expressed skepticism regarding the recovery of discretionary demand in H1 of FY25 for India IT.

While the global brokerage still estimates revenue growth for large cap IT firms will improve in FY25, it expects the growth to be driven by cost take-out deals and sees operating performance vary across the sector in FY24-25. The Japanese broking firm has “buy” ratings on Tech Mahindra, Coforge, Birlasoft and eClerx and “reduce” ratings on TCS, Wipro, LTIMindtree, LTTS, and Mphasis.

Nuvama, however, observed that Accenture’s outsourcing segment is still anticipated to grow higher than mid-single digits during H2FY25 – a positive sign for Indian IT companies.

Accenture’s February-ending quarter report showcased flat revenues year over year, at the midpoint of -2 to +2% growth guidance range.

The company lowered its FY24 revenue growth guidance to 1-3% from 2-5%. Its revenue growth guidance now includes inorganic contribution approaching 3% in FY24. This implies a higher cut in organic growth as well. Accenture expects flattish revenue growth in consulting and mid-single-digit growth in managed services in FY24.

Accenture noted that, while the long-term technology spending trends remain intact, client cautiousness due to macro uncertainties is weighing on tech spending in the near term; clients continue to prioritise cost take-out projects as discretionary spends remain weak.

Price Action: Most major IT firms were in the red on Friday, with TCS down 1%, Infosys down 2.08%, Wipro easing 2.53% and HCL Tech giving up 2.46%.

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