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Stocks of major information technology companies are likely to be under pressure next week due to expectations of subdued earnings for the seasonally weak Oct-Dec quarter. Investors are likely to take fresh views about IT companies after sector heavyweight Infosys announces its Oct-Dec earnings on Friday. Volume growth in general is likely to be lower than that in the September quarter owing to seasonal reasons. The INR (Indian rupee) appreciated by about 2% QoQ (quarter-on- quarter) versus the USD (US dollar) which is slightly negative for margins though the exact impact for individual companies will be determined by company-specific factors.
Oct-Dec is typically the weakest period for Indian IT companies, as there are lesser working days during the quarter due to festive holidays in key markets, the US and UK. Tata Consultancy Services, India's largest IT exporter, has already said that the company's sequential business volume growth for Oct-Dec is likely to be lower than a quarter ago. Volumes to be impacted by furloughs closure, lower billable days, and Sandy Storm (one-time). Benefits from favourable cross currency moves will be limited. Axis Capital expects top four IT exporters to report 1.8% to 2.5% sequential growth, and TCS and HCL Technologies to lead sector growth. Any forward looking statements by companies' managements will be the basis for the near-term outlook for the sector.
TCS will detail its earnings on Jan 14, while NIIT Technologies will share the same on Jan 15. Mid-sized firms, CMC and MindTree will announce their Oct-Dec earnings on Friday and Jan 18, respectively. A key factor to watch out for would be commentary on customers' 2013 IT budgets and on 2013 growth prospects relative to 2012.
Stocks of major information technology companies are likely to be under pressure next week due to expectations of subdued earnings for the seasonally weak Oct-Dec quarter. Investors are likely to take fresh views about IT companies after sector heavyweight Infosys announces its Oct-Dec earnings on Friday. Volume growth in general is likely to be lower than that in the September quarter owing to seasonal reasons. The INR (Indian rupee) appreciated by about 2% QoQ (quarter-on- quarter) versus the USD (US dollar) which is slightly negative for margins though the exact impact for individual companies will be determined by company-specific factors.
Oct-Dec is typically the weakest period for Indian IT companies, as there are lesser working days during the quarter due to festive holidays in key markets, the US and UK. Tata Consultancy Services, India's largest IT exporter, has already said that the company's sequential business volume growth for Oct-Dec is likely to be lower than a quarter ago. Volumes to be impacted by furloughs closure, lower billable days, and Sandy Storm (one-time). Benefits from favourable cross currency moves will be limited. Axis Capital expects top four IT exporters to report 1.8% to 2.5% sequential growth, and TCS and HCL Technologies to lead sector growth. Any forward looking statements by companies' managements will be the basis for the near-term outlook for the sector.
TCS will detail its earnings on Jan 14, while NIIT Technologies will share the same on Jan 15. Mid-sized firms, CMC and MindTree will announce their Oct-Dec earnings on Friday and Jan 18, respectively. A key factor to watch out for would be commentary on customers' 2013 IT budgets and on 2013 growth prospects relative to 2012.
