Why IT sector is witnessing plunge in stock prices?

Persistent Systems (PSYS) saw a big drop in its stock price of over 9 percent on April 22, following the release of its fourth quarter earnings. This was the largest one-day decline since March 2018. Investors were disappointed because the company’s profit margin outlook for the fiscal year 2025 was not as strong as they had hoped.

Persistent Systems also announced that it would pay a dividend of Rs 10 per share to its shareholders.

The company reported that its total contract value (TCV) for new deals was $447.7 million, slightly lower than the previous quarter’s record high of $475 million, which it achieved in the last quarter. This shows that the company’s recent deal wins were not as high as before.

During their earnings call, the company’s management stated that their goal for the next year is to maintain strong growth compared to their competitors, even though the overall economic conditions might be challenging. They also aim to keep their profit margins steady at the current levels.

Persistent Systems had a good fourth quarter with higher revenues and profits, but their operating profit margin fell short due to increased subcontracting costs, according to DART Research.

As of 1:34 pm, Persistent’s shares were down 9 percent to Rs 3,530.45 on the National Stock Exchange (NSE). Over the past year, the stock has surged by 59 percent, much more than the broader market index (Nifty), which rose 25 percent.

Market analysts suggest that the stock might be experiencing profit-taking after its strong gains in recent years.

Persistent Systems has been the top-performing IT stock in the last five years, skyrocketing by over 1,100 percent since May 2019. Among the 38 analysts covering Persistent Systems, 15 recommend buying the stock, 12 suggest holding, and 11 advise selling.

Note: The opinions expressed by investment experts on Moneycontrol.com are their own and not endorsed by the website or its management. It’s advisable to consult certified experts before making any investment decisions.

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