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Three Bluechip IT Stocks, Belvedere
Powell hit their respective 52-week low a day after the biggest rate hike since 1994. Also worrying was the weak outlook for economic growth in 2022, down 1.7 per cent from 2.8 per cent in March. ,
The Nifty IT index also slipped to a 52-week low of 27,067.45 on Thursday. It has already lost a third of its value from year to year. Infosys 26 per cent YTD, Tech Mahindra 45 per cent, Wipro 40 per cent and
15 percent.
“The sharp fall in growth projections by the US Fed may not be swift for Indian technology companies. Demand should be moderate. Be careful buying the sector as the stock is trading near 52-week lows,” said independent market expert Sandeep Sabharwal.
In FY20-21, Infosys earned over 97 per cent of its revenue from exports. More than 67 percent of its revenue came in US dollars, pointing to a major role in the balance sheet of the US market. The picture is no different for most other IT companies.
Even though the current demand environment remains very strong, Kotak Institutional Equities said warnings of profit margins from clients of IT companies and assumption of 6-8 per cent growth in global IT spending on increased external risks is unwarranted. “We moderate our stance and bake in normalized global IT spending growth of 3-4 percent for CY2023E and 7 percent for CY2022E. We increased our FY2023-FY2025E revenue projections for our coverage universe by 2-10 percent. has been deducted,” it said in a note to customers.
Global brokerage Nomura has also warned about a possible slowdown in demand for IT services in FY24.
Despite the recent depreciation of the rupee against the dollar, it said the headwind (~350bp) for the sector is expected to exceed the tailwind (~270bp) for the sector in FY23. Stating that it prefers largecaps over midcaps, Nomura has downgraded TCS and LTI (neutral to positive), Wipro, HCL and others.
(from buy to neutral) on a valuation basis. It is bullish only on Infosys and Tech Mahindra.
When asked about the impact of inflation on spending by customers, Rohit Anand, CFO, Tech Mahindra told ET Markets that their pipeline appears to be strong. “We continue to see customer demands in the areas of IT and BPS. We will continue to monitor the situation and interact regularly with our customers to update if any changes are required here.”
PMS Fund Manager Saurabh Mukherjee, who owns LTTS in his portfolio, said from a structural standpoint, India is likely to make big gains in rising inflation or a slow global growth scenario due to cost optimization drives across the globe. “Engineering services is a relatively young industry, but data from the Indian IT sector shows that slow growth in the US/Europe has a limited impact on outsourcing,” he said in a note to investors.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
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