Wipro Shares Sink 6% On Q1 Earnings: Five Things To Know.

Asia markets lost momentum on Wednesday, after a mixed finish in the U.S. as investors digested second-quarter earnings.

In Japan, the benchmark Nikkei 225 was down 0.64 percent, after finishing the Tuesday session at a six-week high. Across the Korean Strait, the Kospi was off by 0.19 percent. In Hong Kong, the Hang Seng index advanced 0.84 percent.

Chinese mainland markets traded mixed, with the Shanghai composite near flat at 3,035.87, while the Shenzhen composite gained 0.41 percent.

Australia's ASX 200 traded up 0.61 percent, with the materials sub-index lagging, down 1.40 percent. Miners remained in focus on the broader index as they released production reports.

Wipro shares slumped as much 5.7 per cent, following the IT major's June quarter earnings announcement after market hours on Tuesday. Wipro, India's third largest outsourcer, was the top loser in the Nifty50 index today.

Here are the reasons for the selloff in Wipro shares:

1) Wipro posted a net profit of Rs 2,052 crore in the June quarter, missing the Street estimates. Profit miss was on account of 190 basis point sequential dip in EBIT or operating margin to 17.8 per cent. Wipro's margins were hit by salary hikes and on account of its acquisition of Florida-based HealthPlan Services earlier this year. Wipro's bigger rivals TCS and Infosys had reported margins of 25.1 per cent and 24.1 per cent respectively in Q1.

2) Analysts expect Wipro's margin to dip further in Q2, before recovering in the second half of FY17. "Wipro believes that margins will recover in 2HFY17 as acquisitions become more profitable and more automation is brought to bear in projects of strategic accounts," said Nirmal Bang Securities.

3) Wipro forecast muted revenue growth for the September quarter, disappointing investors. Bengaluru-based Wipro expects Q2 revenue to rise by 0.1 per cent to 1 per cent sequentially, indicating major growth headwinds. Analysts said low revenue guidance for Q2 means Wipro will struggle to post a double-digit rise in revenue in the current fiscal.

4) Wipro warned that Britain's decision to leave the European Union could lead some customers to defer business over the medium term. This could hit Wipro's revenue growth in Europe from where the company gets 25 per cent of revenues.

5) Brokerages are not impressed by Wipro's performance in Q1. Emkay Global said Wipro remains its "least preferred" pick in the tier I space. Nirmal Bang Securities retained its "sell" call on Wipro (target Rs 478).

As of 09.40 a.m., Wipro shares traded 4.5 per cent lower at Rs 524.35, underperforming the broader Nifty that traded 0.25 per cent higher.

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