The stock of Wipro has taken quite a beating in 2022 as it reached its 52-week low not so long ago. On 17th October 2022, Wipro’s stock touched a low of Rs 372.40 per share, a price level that the stock hadn’t fallen to since December 2020.

 

The year 2022 spelled certain doom for the stock as it began declining immediately. It declined for the first few days, but the same was not a concrete indicator of a long-lasting downturn. However, the stock began its downward trend after the company announced its Q3FY22 results wherein its profit growth was flat while revenues and margins reported significant growth. The company declared an interim dividend of Rs 1 per share, but that did not help the stock as it plunged over 6% in a day. The stock lost 20.3% in January itself!!

 

The stock traded in a range for the next two months but resumed its downtrend in April. The scrip declined all throughout April and part of May. The investors of the stock saw some relief after the company reported its Q4FY22 results wherein the company disclosed a 4% growth in profits alongside a 28% growth in revenues. 6 months into the year, the stock corrected 42.11%!!

 

Recently, the stock tanked over 7% in a single day after the company announced its Q2FY23 results wherein the company reported a 9.6% decline in profits and missed the estimated revenue figures. The company witnessed a massive sell-off that day as it had a share volume of 42.5 million against the daily average of 7 million. Although attrition eased, the figure was still at 23%. For the period of 10 months ended in October 2022, the stock registered a decline of around 46.17%!!

 

 

However, Wipro isn’t the only IT company that has been declining. TCS lost 15%, Infosys 18.6%, HCL Tech 21% & Tech Mahindra 40.8% in the 10 months of 2022 ending on 31st October 2022. Moreover, Nifty IT, the NSE Index comprising the 10 largest IT companies, declined 29% during the first 6 months of 2022 while yielding a return of -4.36% in a year.

 

Some of the main reasons for such a heavy decline in IT stocks are the supply side pressures, fall in demand amid macro headwinds in the western nations which include factors like interest rates that cause a decline in profits, revenue or sales, and growth, high attrition and steep valuations of international currencies (especially US Dollar and Euro) alongside the sell-off by foreign institutional investors (FIIs). Moreover, the fears of the US and other European markets dropping into recession has been a contributing factor (since the US accounts for a majority of Indian IT companies’ revenues).

 

What can we expect from Wipro in the near future? 

 

Although the stock has seen a significant decline, the stock has begun climbing once again. It recently jumped for 4-consecutive trading sessions and is expected to reclaim the Rs 400 mark in a few upcoming trading sessions.

 

Recently, Wipro entered into a 5-year strategic partnership with Nokia wherein the IT Services giant will be providing global business services to Nokia in support of its new operating model. The upcoming 5G services are said to be a game-changer for IT services. 

 

Furthermore, the IT Services giant has announced a partnership with its subsidiary, Capco, to launch its financial services advisory capability in India, whereby the company will offer strategic advisory and consulting services to Indian financial services firms that are on a journey to digitize. This will strengthen Wipro’s presence in the (reportedly) $8.6 billion Indian consulting market, of which financial services account for around $2.95 billion.

 

 

The RSI indicator is near 50, indicating that the stock is neither overbought or oversold. However, most brokerages are not in favor of purchasing Wipro as there appears to be a near-term weakness in the stock. Wipro’s consecutively falling margins have resulted in the stock receiving a ‘Sell’ call from several major brokerages.  

 

Report by Jobaaj Group.