While stock market indices touched a new peak over the past two days, shares of Wipro – a key index component – tumbled nearly 10%.
Here are three reasons why:
1. Q1 guidance:
A key reason for the stock’s slump is the disappointing guidance for revenue growth in the first quarter of FY15. Wipro expects a -0.3-2% growth in its revenues in the quarter ending June 2014. This is mainly due to a weakness in the India business. However, this Q1 guidance disappointed analysts, especially because the quarter is usually strong for the IT industry.
“The sequential weakness in India IT business also does not completely explain the low growth guidance,” IIFL said in a note. Moreover, Wipro’s peers TCS and HCL Tech expect a higher growth in sales in the quarter. This means that it is likely to underperform the industry in the quarter. “With a weak start, Wipro is also likely to underperform industry growth in FY15 also,” the brokerage firm said.
2. Attrition and hiring:
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