KPIT Tech's warning causes a ₹6,000 crore dent in the market cap of its peers

The sell-off seen in shares of KPIT Technologies Ltd. on Wednesday, July 1, has also impacted its fellow ER&D companies, Tata Elxsi Ltd. and Tata Technologies Ltd., both of which have extended their losing streak.

Shares of Tata Elxsi are trading with losses of 5% and are the second-worst performers on the Nifty 500, after KPIT Tech.

The Tata Group stock has declined for the third day in a row, having declined 4% on Tuesday, and another 1.2% on Monday as well.

This three-day losing streak for Tata Elxsi has resulted in the company losing close to ₹2,500 crore in market capitalization.

On the other hand, shares of Tata Technologies are now down for the fifth day running, even as they have recovered from the lows of the day on Wednesday.

The stock had declined 4.5% on Tuesday and on Monday as well.

The fall in Tata Technologies has resulted in a market cap erosion of nearly ₹4,000 crore across this five-day losing streak.

This has resulted in a cumulative market cap erosion of over ₹6,000 crore for both the Tata Group companies.

Why Are ER&D Stocks Falling?

Both Tata Elxsi and Tata Technologies are taking cue from KPIT Technologies, who warned that its revenue in the first quarter could decline by 1% year-on-year, while brokerages like Motilal Oswal had projected a 2% growth.

The company said that the guidance is reflective of the recent issues and was not anticipated earlier, attributing it to a sharp revenue drop over the last few weeks.

In a separate exchange filing on Wednesday, the company also said that the second quarter revenue performance may be in the same range as the first quarter.

As a result of the announcements made by KPIT Tech, brokerage firm JPMorgan has downgraded the stock and has also cut its price target. JPMorgan's price target is now the lowest on the street for KPIT Tech.

Shares of KPIT Tech are down 15.7% on Wednesday after the announcement, while those of Tata Elxsi are down nearly 5.5%.