The sector’s weighting in the index has slipped to a five-year low of 12.2 per cent, down from the 17.7 per cent at the end of March 2022. The top IT companies —TCS, Infosys, Wipro, HCL Technologies, and Tech Mahindra — accounted for 13.6 per cent of the index at the end of March this year.
The five ended Thursday with a combined m-cap of Rs 22.2 trillion, down from the Rs 24.2 trillion at the end of December and the Rs 23.7 trillion at the end of March this year.
FMCG companies such as Hindustan Unilever, ITC, Asian Paints, Nestle, and Britannia together have a 12.6 weighting in the Nifty 50, up 270 basis points since March 2022. Banks, non-banking financial companies, and insurance companies (BFSI) remain at the top with 37.3 per cent, up from the 34.5 per cent at the end of March 2022. Other big sectors to gain in the past one year include automobiles, and construction and infrastructure.
The near-term outlook of IT companies has worsened due to a lower than expected revenue and earnings growth reported by Tata Consultancy Services and Infosys in Q4FY23. This forced many brokerages to cut the earnings and share price targets of these two companies for FY24.
It’s the same for Tata Consultancy Services. “TCS reported operating performance that was slightly below estimates. The long-term demand story remains intact led by cloud adoption and data analytics across enterprises. However, clients remain cautious and are taking longer time for decision making and are slowing down discretionary IT projects and this would result in lower revenue growth in FY24,” write analysts at YES Securities after TCS’s Q4FY23 results.