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With a rather disappointing results season over, information technology stocks are expected to follow macro cues in the coming week. The 20-stock CNX IT index has run up over 30% in the last five months, mostly on good news coming out of the US, compared to a 16% appreciation in the CNX 100 index over the same period. However, with the Indian market-focused companies continuing to encounter slow growth, tier I IT stocks are likely to keep their premium valuation in the market.
Results of tier II IT companies have largely been disappointing and have failed to keep up with expectations of the market. As a result, stocks such as Zensar Technologies, KPIT Technologies and eClerx Services - which reported results last week - are likely to underperform the overall market and the sector in the coming week.
In addition, the US Federal Reserve is likely to announce a further $10-bln cut in its monthly bond buying programme after its meeting on Tuesday and Wednesday. While most of the expectation for the cuts has been priced into the Indian markets, there is nevertheless likely to be a slight impact on sentiment. If the announced cuts are greater than $10 bln per month, the market sentiment will turn decidedly bearish, impacting all sectors including IT.
The stocks of tier I IT companies, such as Tata Consultancy Services, Infosys and Wipro, are expected to stay strong as continued bullish commentary from the Fed about the economy is likely to reassure investors of a recovery in the IT sector.
With a rather disappointing results season over, information technology stocks are expected to follow macro cues in the coming week. The 20-stock CNX IT index has run up over 30% in the last five months, mostly on good news coming out of the US, compared to a 16% appreciation in the CNX 100 index over the same period. However, with the Indian market-focused companies continuing to encounter slow growth, tier I IT stocks are likely to keep their premium valuation in the market.
Results of tier II IT companies have largely been disappointing and have failed to keep up with expectations of the market. As a result, stocks such as Zensar Technologies, KPIT Technologies and eClerx Services - which reported results last week - are likely to underperform the overall market and the sector in the coming week.
In addition, the US Federal Reserve is likely to announce a further $10-bln cut in its monthly bond buying programme after its meeting on Tuesday and Wednesday. While most of the expectation for the cuts has been priced into the Indian markets, there is nevertheless likely to be a slight impact on sentiment. If the announced cuts are greater than $10 bln per month, the market sentiment will turn decidedly bearish, impacting all sectors including IT.
The stocks of tier I IT companies, such as Tata Consultancy Services, Infosys and Wipro, are expected to stay strong as continued bullish commentary from the Fed about the economy is likely to reassure investors of a recovery in the IT sector.