I. T Stocks Outlook for the week – 15 to 19.12.2014
( www.rupeedesk.in )
Information technology stocks could see some more
correction next week after the biggest IT company in India, Tata Consultancy Services, toned down earning
expectations for the quarter ending December with a 'trading update'.
After market close on Friday, TCS said Oct-Dec numbers
would be "in line" with last year and were unlikely to make up for the weakness seen in its
Jul-Sep results due to continuing weakness in certain industries such as insurance.
Investors exhibited nervousness ahead of the announcement
and drove down the TCS stock by about 1.6% during the day. TCS stock was also hit by
reports that the company is planning to lay off about 25,000 employees in the remainder of this
financial year or so. Chief Financial Officer Rajesh Gopinathan refused to comment on the matter and
said the company routinely reviews employees' performance every year.
Despite a falling rupee, the week was a depressing one for
most large IT stocks. Unlike the previous week when they had corrected by 1%-2%, this week
saw corrections in the range of 5- 7%. Infosys, for example, fell 6.4%, with Tech Mahindra
being the only holdout among large-cap IT stocks with a decline of just 1.1% compared with the
3.7% fall in the Nifty.
The disappointing guidance from TCS has added to worries
about the long-term future of India's big IT companies. Wipro has already said that it wants to
lose about a third of its workforce in an effort to boost profitability, while Infosys is also
under a similar long-term plan to reorient its business.
However, are willing to give the companies some leeway in
achieving long-term profitability. While Infosys' new strategic directions are expected to be
a time consuming process, it is one that will significantly improve company's competitiveness
in large transformational deals.
