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Stocks of information technology companies are likely to trade in a range next week with a positive bias as most stocks are consolidating after hitting their peak after reporting quarterly results. IT stocks had touched their highs soon after the positive Jul-Sep results and usually have the tendency to consolidate after that. On company specific stocks, Infosys said it is well positioned to regain market stock and improve efficiency. The Infosys management has indicated that it is looking to reduce employee costs by decreasing the proportion of senior people onsite, by rationalising their roles. The company will also look at reducing the usage of subcontractors by improving internal training as well as reduce the number of people at onsite locations in business enabling functions. While the company had earlier said cost optimization will take 21 months, Murthy told analysts at Barclays that the company may see some early results of its cost optimization strategy by March. Looking ahead, we feel that key cost pressures, namely wage inflation and higher visa and onsite wage costs after the implementation of the US Immigration Bill are likely to impact Indian IT companies. We therefore believe it is critical for IT companies to focus on scale and revenue productivity as margin defence measures.
Stocks of information technology companies are likely to trade in a range next week with a positive bias as most stocks are consolidating after hitting their peak after reporting quarterly results. IT stocks had touched their highs soon after the positive Jul-Sep results and usually have the tendency to consolidate after that. On company specific stocks, Infosys said it is well positioned to regain market stock and improve efficiency. The Infosys management has indicated that it is looking to reduce employee costs by decreasing the proportion of senior people onsite, by rationalising their roles. The company will also look at reducing the usage of subcontractors by improving internal training as well as reduce the number of people at onsite locations in business enabling functions. While the company had earlier said cost optimization will take 21 months, Murthy told analysts at Barclays that the company may see some early results of its cost optimization strategy by March. Looking ahead, we feel that key cost pressures, namely wage inflation and higher visa and onsite wage costs after the implementation of the US Immigration Bill are likely to impact Indian IT companies. We therefore believe it is critical for IT companies to focus on scale and revenue productivity as margin defence measures.
