Wipro falls 5 pct on broker downgrades

Shares of Wipro continued to decline on Monday,falling 5 pct on weak Q2 results.

Shares in Wipro Ltd fell nearly 5 per cent on Monday,following a slew of brokerage downgrades on concerns India’s No. 3 IT outsourcer was not taking advantage of an improving demand environment.

On Friday,Bangalore-based Wipro missed market estimates for its second-quarter profit as higher wages cut margins,underperforming sector leader Tata Consultancy Services and second-ranked Infosys Technologies.

“The company does not seem confident of the future. That’s why the shares are down,” said Arun Kejriwal,strategist with research firm KRIS. “People do not know what to expect.”

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Wipro shares,which have gained 5.6 per cent so far this year,ended down 4 per cent after hitting an intra-day low of Rs 426.20 earlier. The sector index has risen nearly 18 per cent this year while the market is up 16.3 per cent.

Shares in Wipro fell 4.5 per cent on Friday following its quarterly results.

Credit Suisse and JP Morgan on Monday cut their ratings on Wipro shares to “neutral” from “outperform,” and reduced their price targets.

Domestic brokerages Anand Rathi and Edelweiss also lowered their ratings on the stock to “hold” from “buy.”

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JP Morgan said Wipro’s 5.7 per cent sequential growth in IT services revenue in the September quarter was disappointing as TCS and Infosys had shown double digit growth in the period.

“This is disappointing,as the demand environment is robust and we believe growth for larger companies is limited only by their goals,planning,and ability to execute,” JP Morgan said.

Wipro needed to improve on all three dimensions to draw level with peers,it added.

Earlier in October,Infosys beat analysts’ estimates with a 13.2 per cent rise in September-quarter profit and raised its full-year revenue growth forecast while TCS topped forecast with a 30 per cent rise in profit.

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“We were pretty surprised by the weak revenues,as peers have been rather bullish,” Credit Suisse said in a note on Wipro.

It said Wipro’s performance has lagged Infosys in topline growth both in the near term and also in the longer term,despite nearly a dozen acquisitions by the company in the past seven years.

On Friday,Wipro’s chairman billionaire Azim Premji told a news conference the company would rise to the challenge of returning to be among the industry leaders both in terms of growth and operating margins.

“The industry has seen much stronger volume and revenue growth for the quarter and we recognise and acknowledge this. (We) want to assure you that we will rise to the occasion …and ensure that we return among the industry leaders.”