Tata Consultancy Services Ltd shares fell as much as 5.1% on Wednesday, sparking falls across India's IT outsourcing sector, after analysts cited the company as saying revenue growth could be weakening from the previous quarter.
However, Tata Consultancy reiterated that demand in fiscal year 2015 would improve from the current fiscal year ending in March, analysts including from JPMorgan, wrote in research reports, citing a briefing with management on Tuesday.
Tata Consultancy Services declined to comment.
The reported comments from TCS come after Infosys Ltd chairman Narayana Murthy warned last week that revenue for the fiscal year ending March could grow at the lower end of the company's 11.5% to 12% projection.
"At its quarterly analyst briefing, TCS highlighted that revenue growth in 4QFY14 could be weaker than 3QFY14," Kotak Institutional Equities said in a report dated on Tuesday.
"We are disappointed by the muted outlook for the quarter and expect constant currency revenue growth of around 2%, down from our 3% estimate earlier."
TCS shares were down 4.4% at 12.03pm, compared with a flat performance of the broader Nifty. Rival Infosys Ltd fell 2.6%.
Shares of India's software exporters have been hit badly this month, with the NSE IT sub-index down 12.3% so far in March compared with a 3.9% gain in the NSE, as investors took profits after a powerful rally in the sector last year that was driven by expectations for improving earnings.
Kotak quoted TCS as indicating that weakening revenue growth was driven by weaker spending by customers at home, during a traditionally seasonally weak period for the sector.
But TCS had indicated that Latin America and Europe were likely to show better-than-average revenue growth, Kotak said.
JPMorgan also estimated that TCS could see a 2% quarter-on-quarter revenue growth in January-March, compared with 2.2% in October-December, but said it still expected sales to improve in the next fiscal year.
"Continued confidence in FY15 growth might set the floor for this decline (in share prices). We believe the Jun-14 quarter, the first seasonally strong quarter of the year, is the stern test of TCS's confidence for FY15," JPMorgan said in a note dated on Wednesday.