www.rupeedesk.in
Stocks of information technology companies are seen in a range next week, as we expect
to see continued profit booking following the rally in the sector in the last few weeks. We
see IT stocks moving sideways with a likelihood of a correction as major stocks like Tata
Consultancy Services, Infosys, Wipro and HCL Technologies have been trading at their
life-time and 52-week highs in the past few weeks. Some correction is likely post the
rally seen over the last few weeks. In the long-term, however, the outlook for Indian IT
industry is sunny. The global economy is set to improve going ahead with global GDP
(gross domestic product) predicted to grow by 3.5% in CY2013 and 4.1% in CY2014.
Global IT - business process management spend is expected to grow in the range of 5-6%
over the next two years and global sourcing is set to grow faster at (around) 8% during
2013 and 2014.
Though India continues to be the global sourcing leader, it accounts for only 10% of the
total global IT-business process management spend of $124 bln-$130 bln. This goes on to
imply that the market is huge with untapped opportunity. While we expect TCS and HCL
Technologies to lead growth in the Tier-I IT pack by growing higher than the industry
average in 2014-15 (Apr-Mar), we expect Infosys to post improved performance in the
next financial year. Infosys stock has surged nearly 25% over the past two-odd months
following better-than-expected 3QFY13 (Oct-Dec) results. In our view, such a steep
move implies great expectations of an improved performance in FY14 (2013-14). While
we expect Infosys to grow its revenue faster in FY14, it will be at the cost of margins
because of a highly competitive market and the need to show flexibility in pricing and
deal structuring.
