IT Stocks
Outlook for the week – 08 to 12.09.2014
( www.rupeedesk.in )
Information technology stocks
next week are expected to trade on a positive note
initially, with some correction
expected in the course of the week. Investors will continue
to closely track the rupee as the
currency movement is crucial for IT companies. IT
companies bill majority of their
revenues in dollars and so they earn more if the Indian
currency falls against the
dollar.
Typically, for every 1% change in
the rupee-dollar equation, margins of tier 1 Indian IT
companies are impacted by 25-35
basis points. After being stuck in a tight range for most
part of the session, the rupee
closed at an over five-week high of 60.3550 against the US
dollar on Thursday on sales of
greenback by foreign banks.
During the week, Infosys
announced it has been selected by BP to provide IT services for
application support and
development for an estimated value of $500 mln. Wipro said it
has won a five-year contract from
US-based international tobacco giant and maker of
Marlboro cigarettes, Philip
Morris International Inc, to provide a full suite of IT
infrastructure management
services.
Earlier this week, Wipro said it
is planning to double its 70-strong workforce in Oman
over the next 12-18 months on
rising demand for its services. "Large deal closures in
traditional services continue to
power growth and provide comfort to our revenue growth
estimates. Discretionary spend is
still muted but can improve and power growth in the
medium term, but Indian IT will
need to make the relevant investments to capture this
upside.”
The rupee staying at current
levels will allow Indian IT firm the cushion to do so, while
giving greater comfort to
earnings growth expectations.