Why Newgen Software Share Price is Falling

India's IT and software sector is a cornerstone of the economy. It contributes significantly to GDP and exports while catering to global demand for digital solutions. Companies in this industry offer services like software development, IT consulting, and cloud solutions.

However, the sector is highly sensitive to global economic conditions and market fluctuations. Recent trends show increased volatility, impacting IT stocks.

Speaking of the IT sector, it's impossible not to mention Newgen Software. Newgen Software is an India-based company specializing in digital transformation solutions.

It provides services like document management, business process automation, and customer communication management to industries such as banking, insurance, healthcare, and manufacturing.

With a presence in over 70 countries, it has become a key player in streamlining business processes for global enterprises.

Newgen Software' share price has recently been under the spotlight as it tumbled by 11.2% in five days, along with other major Indian IT stocks.

Let's take a look at the factors driving this decline.

Probable Delay in Rate Cut

Indian IT stocks, including Newgen Software, are under pressure due to the Federal Reserve's recent economic outlook. Federal Reserve Chair Jerome Powell indicated that strong US economic growth allows policymakers to take a cautious approach to lowering interest rates.

This has caused concerns about prolonged tight monetary conditions, leading to a ripple effect on global markets.

Powell's comments suggest that borrowing costs in the US will remain higher for longer. This impacts the Indian IT sector, which relies heavily on the US for revenue.

Prolonged high rates can slow business investments in digital transformation, software development, and IT consulting, directly affecting demand for services offered by Indian IT companies.

Newgen Software, like many other Indian IT firms, faces challenges as its clients may delay or reduce spending on IT projects amidst tighter financial conditions.

Investor sentiment has also weakened as markets expect slower revenue growth and lower profitability for IT companies due to these global economic trends. This has contributed to the sharp fall in Newgen Software share price, reflecting broader concerns across the sector.

However, it is pertinent to note that as of Tuesday Newgen Software was back on an upward trajectory.

What Next?

Newgen Software is focusing on long-term growth through strategic initiatives aimed at market expansion and product innovation.

In a recent interview, the CEO stated that the company aspires to achieve US$ 500 million (m) in revenue over the next 3-4 years.

To reach this goal, it plans to increase its presence in mature markets like the US and Europe, which are expected to drive growth once the demand cycle stabilises.

Newgen Software reported strong quarterly results for Q2 FY25, with revenue growing 23% year-on-year (YoY) to Rs 3.6 billion (bn). This growth was driven by robust performance across regions, particularly in Asia-Pacific, which saw a 53% increase.

During the quarter under consideration its net profit rose 47% YoY to Rs 0.7 bn, supported by higher license sales and improved margins.

The financial services segment continued to be a key contributor, with notable traction in insurance and government verticals. Despite global economic challenges, Newgen's focus on expanding product offerings and entering new markets helped maintain its growth momentum.

Newgen is intensifying efforts to acquire larger clients in these markets while strengthening its base in regions like the Middle East, India, and Asia-Pacific. It is also diversifying its product offerings by expanding into high-growth verticals such as insurance and government.

New initiatives in digital transformation, including solutions for supply chain finance, SME lending, and trade finance, are expected to open new revenue streams.

The company is heavily investing in R&D to enhance its AI and generative AI capabilities, which are becoming central to enterprise software. These innovations aim to improve customer engagement, streamline workflows, and create scalable solutions that can adapt to varied market needs.

Newgen is also focused on cross-selling opportunities within its existing customer base, ensuring sustainable revenue growth. In the coming quarters, Newgen plans to balance its growth strategy by strengthening its presence in high-demand sectors while navigating current economic challenges.

How Newgen Software Share Price has Performed Recently

In the past five days, Newgen Software share price has tumbled 11.2%. In the last month, it is down 13.1%.

In 2024, so far its share price has rallied 38.2% and it has gone up by 67.4% in the last year.

The stock touched its 52-week high of Rs 1,547.2 on 26 September 2024 and a 52-week low of Rs 618.5 on 24 November 2023.

About Newgen Software

Newgen Software is a well-known provider of a low code automation platform for digital transformation. Gartner, forester, frost and Sullivan, and IDC have all given the corporation its seal of approval.

The company provides platforms for business process management, enterprise content management, and customer communication management, with significant mission-critical solutions installed at the world's biggest banks, governments, BPOs and IT companies, insurance companies, and healthcare organisations.

You can compare Newgen Software with its peers:

Newgen Software vs KPIT Technologies

Newgen Software vs Infosys

Newgen Software vs Mastek

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy investing!

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