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HCL Technologies’ stock tanked 12.5 per cent on Thursday after it gave a revenue warning for a second consecutive quarter.
However, this did not have any rub-off effect on stock prices of its frontline peers like Infosys, Tata Consultancy Services, Tech Mahindra and Wipro, which stayed in the positive zone and gained 0.13-2.05 per cent.
This is because brokerages do not expect any negative surprise in the financial performance of other IT companies in the September quarter.
Depreciation of rupee (2 per cent over June quarter) and other currencies like euro and pound against the dollar is expected to benefit most IT companies, both in terms of revenue growth (rupee terms) and margin expansion sequentially.
Besides the currency factor, Credit Suisse attributes the reason to seasonal strength and a stable demand environment. Even in dollar terms, the performance is expected to be steady with upside potential to margins.
The performance of IT companies is expected to be led by Infosys and TCS, while Tech Mahindra is likely to witness recovery sequentially.
Infosys is expected to announce its September quarter results on October 12. Expectations are the highest from Infosys, given the stock’s re-rating after the company’s confidence about future prospects and its aggressive pricing.
Contrasting signals Nomura has issued a warning about the IT companies’ commentary on future outlook, given the contrasting signals of positive demand on one hand and weakening macro indicators on the other. “We believe there has been some worsening of macro demand indicators (US PMI down to a 12-month low in Aug 2015, private jobs data being weaker than last year, and client financials seeing deterioration over the last 3-4 quarters). This seems to have weighed on US growth for Indian IT, in addition to sector-specific issues in Energy/Telecom,” it said in a preview note.
Since the August crash, CNX IT index has performed better than its other defensive peers like pharma and FMCG. In the last one month, CNX IT index has gained close to 4 per cent while CNX FMCG index is down 1 per cent and CNX Pharma index has remained flat.
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