Wipro Shares Plunge 5%, Marking an 8% Decline Over Two Sessions: Unpacking the Reasons Behind the Selloff.

Wipro’s stock has experienced a significant decline, falling more than 5% to an intraday low of Rs 187 on the BSE, marking an overall drop of over 8% in the last two trading sessions. This downturn follows the company’s ex-record date for a Rs 15,000 crore share buyback, which has typically been a catalyst for positive market sentiment. The buyback, announced in April at a price of Rs 250 per share, offers a premium to the market price, yet the reaction appears to be one of profit-taking among investors who purchased shares to qualify for the tender offer, potentially leading to a sell-off phase post-record date.

Analysts from Morgan Stanley have maintained an ‘Underweight’ rating for Wipro shares, setting a target price of Rs 192, which suggests a modest downside of approximately 3%. Despite the company’s effort to uphold a medium-term margin guidance of 17%-17.5%, upcoming wage hikes present a challenge that could exert downward pressure on these margins. The brokerage highlights that Wipro’s near-term growth potential is impeded by client-specific challenges, compounded by competitive dynamics within the IT sector, signaling a lag compared to its peers in revenue growth.

The overall market sentiment has been further affected by external factors, primarily the recent volatility in the US tech index, Nasdaq, which plummeted by 4% due to rising bond yields and heightened expectations of a Fed rate hike. Such macroeconomic conditions typically exert negative pressure on Indian IT stocks as they might compress valuations and instigate cautious spending behavior among US clients. Consequently, these developments could also lead to potential outflows from foreign investors within emerging markets, magnifying challenges for Wipro’s stock performance in the near term.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)