Wipro’s shares fell more than 9% on Monday after the company’s first-quarter results missed expectations. Analysts believe the stock will likely underperform compared to its competitors like Infosys and Tata Consultancy Services (TCS) until Wipro shows improvement in revenue growth.
The stock closed at ₹505.35 on Monday, down 9.2%, marking its biggest one-day drop since March 2020.
Morgan Stanley predicts that Wipro’s recent gains will reverse in the short term. The stock had risen almost 27% from June 3 to July 19.
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“We expect Wipro to continue lagging behind its peers in revenue growth in the near term, which will keep its P/E (price to earnings) ratio lower compared to competitors,” the brokerage said in a client note.
IT stocks had mixed results on Monday. TCS, HCL Tech, and LTI Mindtree ended less than a percent down from the previous close, while Infosys and Tech Mahindra gained 0.95% and 0.11%, respectively. The Nifty IT Index fell 0.38%, while the Nifty ended 0.1% lower, just before the budget announcement.
“Investors had high hopes for Wipro, but the company’s guidance for the next quarter disappointed them,” said Mohit Jain, research analyst at Anand Rathi Institutional Equities. “The stock will likely remain stable in the near term until we see clearer signs of revenue growth.”
Wipro’s shares had risen after Infosys reported better-than-expected first-quarter earnings, with traders making bullish bets on these stocks in the derivatives market.
“There has been significant selling of long positions in Wipro in the options market, despite the stock’s drop at the opening, and it has continued to fall,” said Ruchit Jain, lead research analyst at 5paisa. “Buying interest is likely to shift from Wipro to TCS and Infosys.”
JM Financial expects Wipro to recover slightly later, but sees any drop in its stock as a buying opportunity. “Weak growth and guidance remind us that demand is still uncertain,” said analysts at JM Financial in a note.
“Investors should be cautious not to let excitement and valuations get ahead of the company’s actual performance.”
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