By VarunVyas Hebbalalu and Ashna Teresa Britto
(Reuters) -India’s Tata Consultancy Services’ shares slumped as much as 2.7% on Friday after its second-quarter profit missed Street estimates, although rivals advanced on expectations that demand in their key banking segment was recovering.
The stock, which was choppy in early trade, was last down 2.4% at 4,125.15 rupees.
On Thursday, the country’s No.1 IT firm posted a net profit of 119.09 billion rupees ($1.42 billion), missing analyst estimates, as revenue in its North American market, which accounts for nearly half of overall sales, fell for a fourth straight quarter.
TCS’ revenue declined in North America due to a client in the lifesciences and healthcare vertical reducing the scope of a project, it said, without elaborating.
The results are not a broad-based gauge for demand as the weakness was client-specific, said Abhishek Kumar, analyst at JM Financial.
The market is optimistic about IT companies in light of further U.S. rate cuts, he said.
Indian IT firms get a large chunk of their revenue from the United States.
Still, the company’s banking, financial services and insurance (BFSI) segment, its largest vertical, showed signs of recovery.
Its BFSI division grew in North America, but saw some softness in the UK and European markets.
“TCS’ second-quarter results suggest that the road to recovery in developed markets is likely to be volatile. However, we keep the faith given TCS’ continued hiring and improvement in outlook for BFSI,” Jefferies said.
Rivals Infosys, Wipro and HCLTech, due to report results next week, rose 0.1%-1.5% on Friday. BFSI is a major revenue-generator for Indian IT firms.
“Revenue and margins challenges in Q2 were specific to TCS in our view, but the improving demand visibility and BFSI recovery are positive signs for the sector, PhillipCapital analysts said.
TCS’ second-quarter operating margin inched down 0.2% year-on-year to 24.1%.
At least seven analysts slashed their price targets on TCS’ stock after results, while nine bumped up their price targets, per LSEG data.
($1 = 83.9625 Indian rupees)
(Reporting by Varun Hebbalalu and Ashna Teresa Britto in Bengaluru; Editing by Varun H K and Sonia Cheema)
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