I.T Stocks Outlook for the week – 04 to 08.05.2015
( www.rupeedesk.in )
Stocks
of information technology companies may see a slight bounceback next week if a
government
reiteration that it will not impose minimum alternate tax on capital gains made
from securities transactions of foreign companies leads to a broader market
recovery. Finance Minister Arun Jaitley today made the clarification in
Parliament, while speaking on the Finance Bill in Lok Sabha after markets
closed.
The
Indian stock markets, largely driven by foreign institutional investors, have
been on a losing spree for the last two weeks over media reports that the
government plans to bring all foreign investors into the tax net. Foreign
investors comprise a large chunk of the investment in frontline IT stocks like
Infosys Ltd, Tata Consultancy Services Ltd and Wipro Ltd, and these stocks have
been among the biggest losers in the market due to FIIs' withdrawal. Moreover,
over the last three weeks, the sector reported its most dismal quarterly
performance in recent years.
Among
the latest, KPIT Technologies lost about a third of its market capitalisation
after the
company
reported a 28% sequential fall in its key SAP business unit for Jan-Mar.
Similarly,
Infosys,
which reported its Jan-Mar results Friday, it was seeing a secular trend
towards lower and lower prices in traditional IT services outsourcing, and
plans to cope with the situation by using more automation.
The
only major IT company yet to detail its results is Tech Mahindra, which will
announce its numbers only on May 26. Most companies prefer to see the poor
results as an exception rather than a trend. Commenting on his company's
lacklustre results, TCS Chief Executive N. Chandrasekaran said the March
quarter results cannot be taken as an Indicator for future performance.
Companies
firm up their IT budgets and plans for the year over the first two months, and
most of the actual allotments (to discretionary projects) happens towards the
end of the quarter. However, in the short term, IT stocks would participate in
any bounce back in the broader market.
