I.T Stocks Outlook for the week – 29.12.2014 to 02.01.2015

I.T Stocks Outlook for the week – 29.12.2014 to 02.01.2015

Stocks of information technology companies are seen largely flattish in the coming week, with Oct-Dec earnings drawing near. A weak rupee is expected to lend support, but a cut in outlook by market leader Tata Consultancy Services and ongoing transformation at Wipro and Infosys is likely to curb enthusiasm about the sector.

Estimates for Oct-Dec earnings that will start trickling in from next week will also have an impact on stock prices.

A weak rupee inflates earnings of IT companies, which are denominated in foreign currencies, mostly US dollars. Over the past two weeks, the rupee has depreciated to 63.60 against the dollar from around 61.30 and a bounce back seems unlikely any time soon.

However, tempered updates to full-year expectations and choppiness in the overall equity market due to withdrawal of foreign investors has prevented the full impact of the recent rupee devaluation from being reflected in stock prices of major IT companies. 

We expecting IT stocks to do well this week due to positive signals from US-based competitor Accenture, but the optimism proved misplaced as almost all of them underperformed the Nifty.