• COO Rao remains "confident" for the year ending March 31
  • Overseas investors currently own a majority of Infosys shares

Infosys Ltd., Asia’s second-largest exporter of software services by market value, plunged the most in nine months after Chief Operating Officer U.B. Pravin Rao said spending by clients remains volatile and may hit profit margin in the short term.

The Bengaluru, India-based company’s shares fell 4.3 percent to 1,185.50 rupees in Mumbai on Thursday, the biggest drop since Aug. 24. The company expects “short-term, or quarterly bumps,” Rao said at a conference organized by Citigroup Inc. “But for the year we remain confident.”

Global spending on information technology has stalled, with Gartner Inc. in April cutting its forecast for this year to $3.49 trillion, which is 0.5 percent below 2015. Infosys in April estimated sales to expand between 11.8 percent to 13.8 percent in dollar terms for the year ending March 31, beating analyst estimates. While announcing its earnings, the company touted several major contract wins in the quarter, including a deal with food packaging company ConAgra Foods Inc.

“Infosys warning signals a weak margin outlook,” Sanjiv Bhasin, executive vice president at India Infoline Ltd., said by phone. “Any negative news flow will hurt the stock as it is over-owned by foreigners and is richly valued. Investors now will have to put aside the earlier aggressive guidance and do a reality check.”

The stock has risen 7.3 percent this year and is trading at 17.4 times its 12-month forward earnings, higher than the five-year average of 16.5. Overseas investors own a majority of Infosys shares.

The company in April said fourth-quarter net income rose 16 percent to 36 billion rupees ($539 million) in the three months ended March. That compares with the 35.2 billion rupee average of estimates compiled by Bloomberg. Sales in the quarter climbed 23 percent to 165.5 billion rupees compared with analyst projections for 164.8 billion rupees.

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