Morgan Stanley said wage hikes and productivity likely hit quarter-on-quarter margins and offset rupee depreciation. Traditionally a weakening rupee benefits small and mid-cap IT services more than larger ones such as Infosys, the investment bank added.
Infosys shares were down 1.6 per cent at 11.14 a.m. The shares have gained about 7 per cent after a 21 per cent dive on April 12 when the company's forecast for the current fiscal year disappointed investors.
Infosys may cut its sales outlook for the 2013-14 fiscal from 6-10 per cent to as low as 4-6 per cent, Morgan Stanley said. The possibility of a downward revision in outlook is unlikely to go down well with investors. That's because Infosys' growth estimates are much lower than IT lobby Nasscom's expectations of 12 and 14 per cent growth for the industry in FY14.
Infosys will report its June quarter earnings on July 12, 2013.
Infosys has been lagging behind its other peers over the past several quarter, forcing the management to recall found NR Narayana Murthy as executive chairman of the company last month.
Mr Murthy last month said it would take at least 36 months to build a "desirable" Infosys.
Other IT stocks like HCL Tech and Tata Consultancy Services also traded lower on Monday.
(With inputs from Reuters)