IT Stocks Outlook for the week – 24 to 28.10.2016
(Mixed; HCL Tech seen rising, Tech Mahindra eyed)
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The Market participants are likely to be selective in their
investments for information
technology companies' stocks as Jul-Sep performance of these
companies would be the
deciding factor. Volatility in the broad market due to expiry of
the October derivative
series is also seen weighing on the sector. After the dismal
performance of Infosys and
Tata Consultancy Services, HCL Technologies' better-than-expected
performance in the
September quarter and its positive outlook for the rest of the
financial year improved
the view on the sector.
Next week, earnings of Tech Mahindra, the last Nifty IT firm to
detail its earnings, and
Hexaware Technologies would be eyed. Tech Mahindra is expected to
post a 7.1%
sequential decline in consolidated net profit at 7 bln rupees and
consolidated net sales of
70.9 bln rupees in Jul-Sep, up 2.4% on quarter.
If the company meets or beats expectations, then its stock is seen
rising up to 450
rupees in the near term. However, if its earnings are below
expectations, then the stock
might fall below 400 rupees. During the week, HCL Technologies
maintained its
revenue expectation for 2016-17 (Apr-Mar). The company expects to
grow 12-14% in
constant currency terms, which translates into 11.2-13.2% revenue
growth in dollar
terms. On the operating side, earnings before interest and tax
margins for 2016-17 are
seen in the range of 19.5-20.5%.
In the case of Wipro, though the company posted Jul-Sep profit and
revenue growth
largely in line with expectations, the company's sales guidance
for Oct-Dec
disappointed. The company expects sales from information
technology services to be in
the range of $1.92 bln-$1.95 bln, translating to flat-to-2%
sequential growth. Shares of
Wipro are expected to fall on Monday and the decline is likely to
continue in the short
term.