Outsourcing, already regarded as a threat to Western jobs, is set to get cheaper: India's largest IT outsourcing group is to give away services for free in an effort to lure large clients such as Wall Street's beleaguered banks to sign off big contracts.

Shares in Tata Consultancy Services (TCS) fell by 9 per cent in morning deals in Bombay this morning – a record intraday fall for the stock.

The slump came after India's largest private-sector employer missed earnings targets yesterday by a sizeable margin and posted its first quarter-on-quarter fall in earnings in three years.

TCS said today that it would shoulder the cost of "transition work" on selected large outsourcing contracts, a move designed to buttress future earnings.

The charges, which previously would have been paid for by customers, cover the preparatory work carried out before a function – such as the running of a piece of back-office work for a bank – is outsourced from the West to India.

"This is an investment that will be recouped as contracts proceed," a TCS spokesman said.

Outsourcers are looking for a way to clear the heads of Western banking executives left shell-shocked by the meltdown on Wall Street and in the City.

Indian executives have complained for several months that clients in the banking sector have delayed spending decisions, often after the departure of senior executives in the wake of the sub-prime debacle.

"These people have been too involved in their own problems so far," the TCS spokesman said.

TCS posted fourth-quarter profits of 12.56 billion rupees (£157 million), up 7 per cent on the same period a year ago but some way short of the 13.75 billion rupees forecast by analysts.

Earnings for the three months to March 31 were down more than 6 per cent.

Similar lacklustre figures have now come from all four of India's largest software exporters, who are battling with the rupee's appreciation against the dollar and a slump in demand from the financial sector in the West.

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