IT Stocks Outlook
for the week – 16 to 20.06.2014
(www.rupeedesk.in)
(www.rupeedesk.in)
The movement of the rupee against the
dollar will set the trend for IT stocks next week.
However, against the backdrop of the
sharp gains in IT stocks this week, some
consolidation is expected next week.
Yesterday, the rupee weakened against the dollar
and ended at a one-month closing low
of 59.76000, down 46 paise from 59.3000
Thursday, amid rising tensions in
Iraq. Intraday, the rupee touched a one-month low of
59.8000. Currency movement for IT
companies is crucial as they are heavily dependent
on overseas markets for a major chunk
of their revenues. So, any rise in the rupee
would hurt them.
Rajesh Gopinathan, chief financial
officer of Tata Consultancy Services, said in a
conference call with analysts
yesterday that the company's earnings before interest and
tax margin are likely to fall by 100
basis points in Apr-Jun due to the recent appreciation
in the rupee. Amid the weakness in
the broader market, IT companies witnessed heavy
buying this week as investors chose
to churn portfolios to defensive bets.
Among IT stocks, HCL Technologies,
which rallied over 8%, was the star of the week;
but Infosys stole the limelight as it
ended speculation by announcing key changes in its
top management.
The Bengaluru-based software major
appointed Vishal Sikka as its new chief executive
officer and managing director on
Thursday. This appointment was viewed as positive by
the Street as market participants are
confident of Sikka's capabilities to make the
company stable again.
Sikka's commentary on the company's performance
will be the key factor impacting the
stock. The appointment of Sikka as
CEO and MD is a step in the right direction, given his
strong credentials and proven track
record. However, his approach and strategy will be
keenly watched in the light of the
recent senior-level exits and Infosys' lower revenue
growth compared to peers.