IT
Stocks Outlook for the week – 23 to 27.05.2016
(In range next week; focus on Tech
Mahindra)
( www.rupeedesk.in )
Stocks of information technology
companies are seen trading in a range next week due to lack of positive
triggers in the sector and negative sentiment in the broader market. However,
weak rupee and negative sentiment in the banking
sector may divert investors to IT sector. The Indian currency ended at an over-11-week low against
the dollar yesterday, and is expected to depreciate following weeks. Yesterday, the Indian currency
ended at 67.44 to a dollar, the lowest closing level since Mar 2. This is seen as a positive for the
sector of which majority are software exporters to the US. Stocks of Tech Mahindra will be in focus
next week as the company, which will be the last of the large-cap IT companies, will detail its Jan-Mar
earnings on Tuesday. So far, barring Infosys, heavyweight IT companies have disappointed market
with lower-than-expected performance or weak guidance.
Analysts expect Tech Mahindra to
report a 2.2% sequential fall in its consolidated net profit for Jan-Mar to 7.4 bln rupees and a 2.3%
sequential rise in consolidated net sales to 68.5 bln rupees. In dollar terms, the company's sales are
seen declining marginally from $1.0 bln a quarter ago. The stock is seen performing better than
Infosys. Stocks of HCL Technologies, the only large cap stock, are seen trading with a negative
bias. Investors need good news from the company's management for a positive trigger in the stock.
Analysts have recommended investments in mid-cap IT companies and are bullish on Sonata Software
and eClerx Services, which posted Jan-Mar earnings above estimates. eClerx Services reported a
22% sequential rise in Jan-Mar consolidated net profit to 1.1 bln rupees and consol net sales of
3.43 bln rupees, flat on quarter.
