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Stocks of major information technology companies are seen trading in a range next week with a positive bias, boosted by the strong quarterly performances of the top four players. The CNX-IT index, which saw some consolidation last week post its rally, is expected to remain positive over the next five trading sessions.
The top three companies Infosys Ltd, Tata Consultancy Services Ltd and HCL Technologies Ltd continued to rise this week on the back of their Oct-Dec performances. In spite of a market estimate beating Oct-Dec result, Wipro Ltd failed to impress the Street on lower business volume growth and wide range of dollar revenue guidance.
IT stocks have reacted positively post Q3FY13 (Oct-Dec) results commentary on 1) discretionary spending picking up, 2) FY14 (Apr-Mar) looking better than FY13 (Apr-Mar) and 3) all companies registering increased realisation and better-thanexpected margins.
Wipro is our top pick as we see room to improve revenue growth and margins in FY14 (2013-14) on the back of a 3% upside to utilisation and benefits from higher revenue productivity. We remain positive on Infosys as our valuations factor in a relatively lower revenue run rate in FY14 vs (versus) TCS, and we remain cautious on HCLT after the recent top management changes.
