IT Stocks Outlook for the week – 20 to 22.10.2014
( www.rupeedesk.in )
Stocks
of information technology stocks are expected to move in a narrow range with a
negative
bias next week, and will also take cues from Wipro's second quarter earnings to
be
announced
on Wednesday. This week, the mood in the IT industry wasn't positive as both
Tata
Consultancy Services and HCL Technologies did not post overwhelming numbers.
TCS
reported lower-than-expected Jul-Sep numbers as two of its verticals, UK
insurance
and US
retail, underperformed. The company reported consolidated revenue of 238.17 bln
rupees,
while analysts were expecting 239.57 bln rupees. Its net profit of 52.88 bln
rupees
was also
slightly below street expectations of 53.64 bln rupees.
Yesterday,
The IT index closed in the red, given the negative market sentiment. IT index
came
under selling pressure. TCS stock opened sharply lower as the street reacted to
the
company's
outlook which indicated that it may not be able to beat FY14 growth rate of
16.2%.
HCL Technologies' Jul-Sep results also disappointed the Street as both net
profit and
sales
declined sequentially. While the net profit for the quarter declined 15.2%
sequentially
to 16.82
bln rupees, the net sales declined 15% on quarter to 40.54 bln rupees.
Bengaluru-based
mid-sized IT company Mindtree was the only one to beat analyst
expectations
with a net profit of 6.2% on quarter to 1.37 bln rupees on the back of a
sequential
revenue growth of 5.3% to 8.89 bln rupees.
We
expect Wipro to post a 1.9% sequential growth in revenues. The IT services
division's
earnings
before interest and tax margin is expected to decline 21 basis points on
quarter on
account
of wage hikes for two months. The industry will closely watch Wipro
management's
commentary
on the overall demand environment and large deal wins; and the outlook for
the
margin and revenue guidance for Oct-Dec. Investors will continue to closely
track the
rupee as
currency movement is crucial to IT companies. Typically, for every 1% change in
the
rupee-dollar equation, margins of Tier I Indian IT companies are impacted by
25-35
basis points.
Yesterday, the rupee closed at 61.4400 per $1 as against 61.8400 on Thursday.
