IT Stocks Outlook for the week – 23 to 27.11.2015
Infosys'
Oct-Mar margin guidance cut to weigh
After
Infosys Ltd's margin warning, the sentiment for information technology sector
stocks,
which was already low, is expected to weaken further next week. Adding to
troubles
of the sector whose major business is from abroad, the rupee is seen gaining
strength
against the US dollar. Also, the broader market is expected to be volatile due
to
rollovers
to the December futures and options series. The Indian currency, which ended
at
66.18 a dollar yesterday, is seen trading in the range of 66.00-66.30 rupees
per dollar
on
Monday.
Infosys
said its margins in Oct-Mar are expected to be lower than those of Apr-Sep due
to
seasonal
headwinds such as rise in furloughs. The company's margins were expected to
rise
to 28.5% by the end of 2015-16 (Apr-Mar), but now further downward revisions in
earnings
estimates for the current and following fiscal year by analysts is imminent.
Analysts
are concerned that if Infosys, being a sector leader, has said its performance
in
the
second half is likely to be poor, other companies may face similar concerns.
However,
fundamental analysts believe that this is the right time to invest in the
stocks of
these
companies with a long term view. The Infosys stock price has corrected 10% in
the
past
week in view of a weak December quarter and rising clamour around the (US)
immigration
bill. We would use this as an opportunity to buy. Stocks of mid-cap
companies,
which were trading with a positive bias in the past few weeks, are seen range
bound
in the following week. However, analysts are still positive on Hexaware
Technologies
and KPIT Technologies which are expected to perform well in Oct-Dec.