IT Stocks Outlook for the week – 18 to 22.05.2015
(Seen
recovering as market factors in muted earnings)
( www.rupeedesk.in )
Stocks
of information technology companies could trade with a positive bias next week,
with the large cap companies being expected to do "reasonably well",
recovering after the sector posting significant losses owing to muted earnings
in the Jan-Mar quarter. However, the mid cap companies may fail to bounce-back
in the next week. The Indian stocks markets witnessed another volatile week
along with the domestic currency, breaching the crucial psychological level of
64.00 rupees per dollar, falling as low as 64.2525 per dollar during the week.
While the rupee's depreciation is otherwise good for these companies as they
export software and services, a sharp and sudden fluctuation could lead to
losses on foreign exchange hedging and loans.
However,
the local indices recovered drawing support from recovery in European equities
as a result of easing sovereign bond yields, rebound in the rupee, and positive
India consumer price inflation data. Among big IT stocks, HCL Technologies fell
by 1.25% during the week, followed by Tata Consultancy Services which fell by
0.64%. Infosys was the only major company to rise marginally by 0.19%. Share
indices are expected to trade within a narrow range next week with Corporate
earnings and developments in overseas markets expected to provide broad cues to
the local equities.
US
Fed is likely to hike rates which represent strengthening of the economy. It
stocks will be the first one to benefit from that. With the volatility in the
domestic currency and expectations of an interest rate hike by the US Federal
Reserve inching closer, a stronger dollar would enable IT stocks to participate
in any bounce-back in the broader market.
While
Infosys is expected to outperform, sighting its Q4 FY2015 performance and its
FY2016E revenue guidance, TCS owing to a 4% upgrade in the earnings per share
in the on going financial year. Most IT companies have detailed their financial
results for the Jan-Mar quarter with Mphasis scheduled to detail its results on
Friday.
With
the volatility in the domestic currency and expectations of an interest rate
hike by the US Federal Reserve inching closer, a stronger dollar; IT stocks
would participate in any bounce-back in the broader market.
