I. T. Stocks Outlook for the week – 28.09.2015 to 01.10.2015 May see buying interest unless RBI cuts rates

I. T Stocks Outlook for the week – 28.09.2015 to 01.10.2015

May see buying interest unless RBI cuts rates

( www.rupeedesk.in )

The information technology companies are expected to witness continued buying interest unless the Reserve Bank of India cuts interest rates. Majority of market participants expect the RBI to cut the repo rate by 25 basis points, while some hold the view that the central bank may maintain the current rates.

However, repo rate cut of up to 25 basis points has been factored in, and if announced, is unlikely to cause major triggers. We believe that if the RBI does cut the rates, market players are seen exiting defensive stocks such as IT and pharmaceutical to invest in the banking sector. However, this is expected to be a short-term trend.

In the week, the sector has witnessed a high rollover of long positions, as the rupee is expected to continue depreciating against the US dollar. Yesterday, the Indian currency ended at 66.1550 rupees to a dollar. IT sector are bullish on Wipro Ltd and Infosys Ltd due to recent announcements of deal wins and expansion plans made by them.

Prompted by the strong order pipeline, Wipro said it is increasing its workforce in Qatar over the next 12 months and also scale up near-shore delivery centres there. Infosys Ltd is set to get a 13.2-bln-rupee order to develop and provide software solution for implementing the goods and services tax regime.

In the week, HCL Technologies Ltd launched a platform integrated with automation services while Tata Consultancy Services Ltd launched analytics-based software solution. We are expecting bullish about IT companies' investments in digital services.

The top four IT companies--HCL Technologies, TCS, Infosys and Wipro—are expected to gain major market share in automation which is expected to be a revenue drivers. HCL Technologies Ltd and Wipro Ltd are likely to continue their focus on automation in infrastructure services.

IT Stocks Outlook for the week – 08 to 12.06.2015 (Rupee movement eyed for Tech companies)

IT Stocks Outlook for the week – 08 to 12.06.2015

(Rupee movement eyed for Tech companies)

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Signs to technical weakness in the rupee, after it crossed the crucial level of 64 rupees against the dollar, are expected to keep trader interest around information technology stocks.

Announcements, during this week, by frontline companies such as Infosys and Wipro related to cutting attrition and incentivising staff are seen keeping these stock.

Wipro raised salaries by up to 7% for offsite employees, while Infosys said it is looking at a stock option plan. Encouraging outlook from Infosys CEO Sikka at an analyst meet in San Francisco on an improving demand environment is expected to keep sentiment positive.

The market is undergoing a sectoral churn so the defensive stocks are likely to perform well next week after the interest rate cut on Tuesday.

IT Stocks Outlook for the week – 25 to 29.05.2015

IT Stocks Outlook for the week – 25 to 29.05.2015

 Large cap companies expected to trade higher

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Stocks of information technology companies may trade with a positive bias next week with the large cap companies seen faring particularly well in what is likely to be a volatile broad market ahead of May futures expiry. However, the mid cap companies may continue to under-perform in the next week. The Indian stock markets witnessed another volatile week led by a multitude of companies reporting their financial results for the quarter ended Mar 31.

The local currency depreciating intra-week aided the information technology sector which saw most of the IT companies in Nifty rise by 4% on an average. The rupee's depreciation is otherwise good for these companies and market participants engaged in value buying as the stocks were trading at attractive rates. Focus will be more on companies reporting earnings.

Most IT companies have detailed their financial results for the Jan-Mar quarter. Tech Mahindra is the only one remaining and it is scheduled to detail its results on Tuesday.

Tech Mahindra is expected to report flat sequential revenue growth for the Jan-Mar quarter,

excluding the impact of acquisitions and foreign exchange movement, and margins are seen

declining by around 2.5 percentage points due to wage hikes, acquisitions, and cross currency

impact.

IT Stocks Outlook for the week – 11 to 15.05.2015

IT Stocks Outlook for the week – 11 to 15.05.2015

Stocks of information technology companies are likely to outperform the overall market

if overall sentiment remains bearish, even as the sector is expected to benefit from any

weakening of the rupee against the dollar. We expected, this week saw a slightly better

performance from IT counters compared to the broader market. HCL Technologies led

the pack with a 5.1% jump, while Infosys edged up only 0.8%.

The markets saw a large amount of mayhem this week with foreign investors continuing

to offload their Indian shares in the market. Friday saw a slight bounce-back with many

local players buying up shares that had tumbled sharply over the previous days. After three consecutive weeks of weakness and a loss of over 800-points on the Nifty, the market managed to put a brake on the relentless slide last week, courtesy the 134-points rally on Friday. We believe that IT and Pharma sectors could be good medium-to-longterm bets as we believe that a major part of the cross-currency headwinds have already

played out.

Next week will also see volatility due to the release of Industrial Production (IIP) and

Inflation data. However, the biggest factor - FII sentiments - is still unpredictable. Government's move to set up a high level committee to decide MAT issue has helped

market on Friday. This could reduce FII's concerns over the medium term. But the risks

prevailing with Q4 and outcome of key bills still remains, which will decide the market

momentum going forward.

IT stocks could gain from a weakening rupee and if the FIIs continue to sell they would

outperform broader markets. On Friday, IT stocks were largely flat, as rupee strengthened

nearly 0.5% from the 64.50 levels against the dollar seen on Thursday.

IT Stocks Outlook for the week – 13 to 17.04.2015

IT Stocks Outlook for the week – 13 to 17.04.2015

 ( www.rupeedesk.in )

Stocks of information technology companies are likely to show some volatility in the coming week on account of the impending results announcements of Tata Consultancy Services and Mindtree.

Both companies will report their results on Thursday after market hours. Tata Consultancy Services shares, which had corrected through March after the company held out a disappointing forecast, has been rising for the last two weeks on an assessment that the correction has been overdone, and that the results may not be all that bad.

However, stripped of the impact of an appreciating rupee, revenue is seen rising 2.5% on quarter. We believe weak 3Q results and soft fourth-quarter guidance are already in the price, with TCS underperforming Infosys and Wipro by 11/13% year-to-date and its one-year forward price/earnings premium vs INFO narrowing to just 10% (vs ~25% a year back).

Not surprisingly, TCS stock was up 4.4% this week, making it the top performing large-cap IT stock in India, while other stocks like Infosys, HCL and Wipro moved largely in line with the market.

Overall, the market is expecting 2-3% revenue growth for IT companies for Jan-Mar, when the numbers are adjusted to strip away the impact of currency movements.

We expect Tier-1 IT to deliver a healthy 2-3.8% sequential constant currency revenue growth in the March quarter on top of an unconventionally strong December quarter.

IT budget cycles of clients follow calendar year. Budget allocations take place in the first couple of months and IT spending picks up as the year progresses. Given this, absence of growth acceleration in the March quarter is normal.

If TCS' results fail to live up to expectations, it is expected to impact the broader IT sector stocks as well. HCL Technologies will report its results on Apr 21, followed by Infosys on Apr 24.

IT Stocks Outlook for the Week – 06 to 10.04.2015

IT Stocks Outlook for the Week – 06 to 10.04.2015

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Stocks of information technology companies may continue to underperform for forecasts of Jan-Mar earnings. Most IT stocks fell by around 2% last week even as the broader market ended up by around 3%.

Last week, HCL Technologies joined the list of IT companies in voicing warning about rising dollar impacting both revenue and margins. It said revenue for the Jan-Mar quarter would be hit by about 280 bps and margins by around 80 bps. The US dollar appreciation against global currencies is likely to impact the reported revenue growth of Indian IT companies in Q4 FY15.

We expect that the negative impact of cross currency movement will be felt in FY16E as well given the currencies stay at same level. Volume growth in Q4FY15 will be impacted due to following factors - a) lower spending in verticals such as telecom, insurance, b) sharp decline in oil prices which might affect IT spend of energy and utilities vertical and c) slower pick-up in momentum in Jan-Feb.

Technology companies would likely (to) report low USD revenue growth in the March 2015 quarter (between -3.4% and 0.5% QoQ) due to seasonal weakness and cross-currency headwinds. Margins would also be adversely impacted by about 30-80 bps due to exchange rate movements.

However, the IT stocks have corrected sufficiently over the last few weeks, and more than fourthquarter numbers, they are likely to react to management commentary about the coming year. While IT stocks have corrected amid Q4 profit warnings, outlook for FY16 remains the key. We continue to prefer large-caps (Infosys/HCL Technologies) with limited earnings downgrade risks. Infosys Ltd, which usually kicks off the earnings season, will report its results on Apr 24.

IT Stocks Outlook for the week - 23 to 27.03.2015

IT Stocks Outlook for the week - 23 to 27.03.2015

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Stocks of information technology companies are expected to remain range bound next week as investors will await Jan-Mar results. Last week saw a reversal of sorts with large-cap stocks-- Tata Consultancy Services Ltd and Infosys Ltd--reporting net gains while smaller players such as HCL Technologies Ltd and Tech Mahindra Ltd witnessed decline of around 3%. Wipro was the biggest gainer this week with a 2.1% rise. IT stocks had seen corrections earlier this week after a spate of downward revisions in outlook for the fourth quarter of the current financial year ending March.

Though companies largely blamed the strong dollar for revising downward their expectations for Jan-Mar, a few of them were also hit by client-specific issues, leading to some doubts on the sector as a whole.

TCS indicated a soft quarter, while Mindtree and Persistent Systems guided down. KPIT

Technologies said it expected a muted quarter. The current quarter weakness includes a mix of seasonality, increasing volatility in business and client-specific issues. Our broader view of

strength in demand remains unchanged. Use any weakness to buy into IT names.

However, more than stock- or sector-specific issues, shares are being buffeted by

macroeconomic and liquidity-related factors such as expectations of an immediate interest rate increase in the US. Interestingly, despite dovish comments from the US Federal Reserve, the Indian markets ended down this week, restricting a pull-back seen in big IT stocks this quarter.

IT Stocks Outlook for the week – 16 to 20.06.2014

IT Stocks Outlook for the week – 16 to 20.06.2014
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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.

IT Stocks Outlook for the week – 09 to 13.Jun.2014

IT Stocks Outlook for the week – 09 to 13.Jun.2014
(www.rupeedesk.in)

Stocks of information technology companies are likely to open on a confident note on

Monday as US jobs data came in marginally stronger than expected on Friday evening,

but may continue to lag the broader market in case of a strong up move in the overall

market. IT stocks lagged the market last week as the Nifty and the Sensex put up one of

their best performances in recent times, rising nearly 5% in five days. In comparison, the

CNX IT Index was nearly flat. The previous week had seen a bounce-back in IT stocks

ahead of the expiry of futures and options.

IT stocks have consistently underperformed the market since mid-May, by when it was

clear that India would have a government led by pro-reform Narendra Modi. While the

Nifty has gained 14% since May 9, the CNX IT has actually lost 0.5% during the period.

With the markets already at their historic highs, any further increase in their levels will

continue to see IT stocks underperform, though declines are not expected. The market

seemed to have shrugged off news of the exit of the 12 senior management professionals

from Infosys over the last one year. However, a cause for concern has been the rising

rupee, which has risen to about 59 rupees to the dollar from about 62 rupees in February.

However, believe that the strong performance of the US economy would offset the

impact of the rising rupee. Earnings for IT companies have largely tracked revenue

growth, and not as much rupee-dollar levels. We are positive on IT, given US$ revenue

growth visibility for these companies, higher correlation to US$ revenue growth than to

currency, and resilience to potential domestic economic shocks. Another factor that is

likely to influence the market next week is India's industrial production data for April and

inflation numbers for May, both of which will be released on Thursday.

IT Stocks Outlook for the week - 19 to 23.May.2014

IT Stocks Outlook for the week - 19 to 23.May.2014

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Most stocks of information technology companies are seen tracking the wider

market next week. Clear majority for the Bharatiya Janata Party-led National

Democratic Alliance in the Lok Sabha elections has boosted investor

confidence. Yesterday, when there was a selloff towards the close,

IT stocks still saw some good buying. We expect IT stocks to give around 10%

return in the 3-4 months, led by the positive sentiment in the market. The CNX

IT Index yesterday closed at 9111.40, down 2.2%, while the Sensex and the

Nifty gained 0.90% and 1.12% respectively.

Stocks of Tata Consultancy Services, India's largest IT services provider,

slipped 1.15% to close at 2,160 rupees. Its closest peer Infosys ended down

2.74% at 3,182.90 rupees. Investors to "invest gradually" in IT stocks as a rise

in the rupee can push IT stocks lower.

IT Stocks Outlook for the week - 17.02.2014 - 21.02.2014

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 Information technology stocks are likely to be range bound in the coming week as the interim budget to be presented on Monday is unlikely to include any major announcements. IT stocks bounced back this week following some profit booking late last month. As expected, the National Association of Software and Services Companies projected a 13-15% growth rate for IT and IT-enabled services exports for the next financial year, ahead of its estimate of a 13% growth in current year. IT stocks recovered some losses seen at the end of January but are still about 3-5% below highs seen in the third week of January. An exception was HCL Technologies, which gained 6.9% last week, ended the week at an all-time high of 1,497.35 on Friday. 

The Union government will present an interim budget on Monday, but the proposals are unlikely to contain any big news for IT sector. Market participants are keeping cautious approach and awaiting this event to get over before initiating any fresh bets. Any indirect-tax benefit will have an impact on stock prices. At its annual leadership event held in Mumbai this week, industry association National Association of Software and Services Companies outlined a threat to the current business models of IT companies from the emergence of disruptive technologies such as cloud computing. Companies outlined their respective strategies to deal with the impending threat.

While Tata Consultancy Services and Infosys Ltd said they will develop their own cloud computing platforms, others such as Tech Mahindra and Zensar Technologies have pointed to a more service-oriented approach. More news on the companies' strategies is also likely to influence investor sentiment on the stocks next week. 

IT Stocks Outlook for the week - 10.02.2014 - 14.02.2014

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The overall direction of information technology stocks, which saw profit booking this week, is likely to be set by projections by the industry body on Tuesday about India's IT exports in financial year 2014-15 (Apr-Mar). Going by the bullish commentary from companies such as Tata Consultancy Services, Wipro, and Infosys, expectations are that National Association of Software and Services Companies will set a growth target of 14- 16% for 2014-15. Companies such as Infosys, TCS and HCL Technologies, which account for more than half of India's IT exports, are on track to end the current financial year with growth of 12- 17%, largely above NASSCOM's target of 12-14% for the year. As a result, a bullish estimate of 14-16% growth for exports for next year would imply growth rates of 14-18% for top tier IT companies, and could lead to a positive rerating of their stocks. Historically, the top-5 Indian IT vendors have outperformed industry growth. This phenomenon could repeat in FY15, thus triggering upgrades in consensus estimates for top-5 players, particularly for Infosys and HCLT (HCL Technologies), while TCS could see marginal upside. After galloping for the past seven months, most IT stocks saw profit booking early this week. The notable exception was Tech Mahindra, which reported better-than-expected results. In addition, a lower-than-expected guidance on revenue from Cognizant Technology Solutions, the second-biggest IT exporter from India, on Thursday further dampened sentiment and pulled down frontline IT stocks by 1-2% yesterday. Stocks of TCS, Infosys and HCL Technologies fell 3-5% during the week, compared to a 0.4% decline in the Nifty. The determination showed by the US Federal Reserve to push ahead with its $10- bln-per-month cut in its stimulus program is also expected to weigh on frontline IT stocks, which typically have high foreign investor holding. Top Indian IT stocks have risen by 50-85% in the last seven months, boosted by rising profitability owing to rupee depreciation, strengthening of the US market, and an overall shift in investor interest away from domestic-market focussed companies.

IT Stocks Outlook for the week - 03.02.2014 - 07.02.2014

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Information technology stocks are likely to continue their role as defensive plays as the market prices in renewed certainty that the US Federal Reserve will indeed cut its bond-buying stimulus programme by $10 bln a month. The Federal Reserve on Wednesday announced its second cut to the bond-buying programme. The programme, which originally involved pumping in liquidity of $85 bln, has now been reduced to $65 billion per month. The markets, which had been hoping against hope that the tapering would not happen at the rate of $10 bln per month, fell on Thursday and Friday. 

Given that nearly all the large- and mid-cap IT companies have already reported their results, their performance this week will again be determined by the direction of the overall market. This second round of QE tapering has had a negative impact on market sentiments and while it was more or less factored in, the positive rounds of economic indicators from the US provide further indication that the cutback in stimulus spending will continue throughout the year. In the week gone by, stocks like Tata Consultancy Services and Infosys fell less than the overall market, and the same is expected to continue. 

In addition, comments about a healthy US economy would also aid sentiment around IT companies, which get most of their revenue from the market. One of the outperformers last week was HCL Technologies, which rose 3.6% in a negative market, and valuations were getting stretched. HCLTECH appears to be long heavy as stock has gone up substantially with rise in open interest. Though there are no signs of exhaustion, counter is in overbought zone.  

IT Stocks Outlook for the week - 27.01.2014 - 31.01.2014

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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.

IT Stocks Outlook for the week - 06.01.2014 - 10.01.2014

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Information Technology stocks are likely to trade in a narrow band in an overall market that is likely to show a negative bias, ahead of Infosys' third-quarter results. Infosys will report its results on Friday, we are looking for an upgrade in the company's guidance for the full-year. The return of Mr. Murthy to Infosys has raised hopes on the medium-to-long term prospects of the company. Based on our expected revenues in 3Q, we expect the company to increase the guidance range. Though Oct-Dec is a traditionally weak quarter, the US market has been gaining strength in recent months, limiting the chances of an  underperformance by the IT sector.
    
Last quarter, Infosys reported numbers well above expectations, leading to a rally in IT stocks that fizzled out later as companies like Wipro and HCL Technologies failed to significantly outperform expectations. The market is likely to be more circumspect this quarter, even if Infosys reports better-than-expected numbers on Friday.

In addition, the Bangalore-based company also said it was dismantling its key decision making body in favour of a traditional pyramid-based approach to decision making, and on Friday appointed two new presidents to oversee its business.

IT companies will not get any help from rupee devaluation in the December quarter as the dollar-rupee rate has remained largely unchanged on quarter. The overall down sentiment in the market is likely to result in nervousness next week in IT stocks as well. In the week that passed, overall IT stocks held up even as the broader market slipped.

IT Stocks Outlook for the week - 23.12.2013 - 27.12.2013

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Stocks of information technology companies are likely to continue to do well in the next five sessions after the market, this week, shrugged off the much-awaited announcement of the tapering of the US Federal Reserve's $85-billion-per-month bond-buying programme. 

Market sentiment was supported by an unexpected decision by the Indian central bank to keep policy interest rates unchanged--contrary to widespread expectations for an increase--as the Reserve Bank of India betted on a decline in inflation. The RBI action, which came on the same day as the US Federal Reserve's announcement of tapering, helped support the market and prevent any panic reaction.

Stocks of IT companies, whose performance is tied to US economic growth, have been on an upswing in recent weeks due to strong signals emanating from the world's largest economy, even as the broader market has seen strong volatility on domestic concerns. The sector continued to outperform the broader market last week, with the CNX IT Index rising by 6% compared with a 1.7% rise in Nifty. In the previous week, the IT index has risen by just 1.4%.

The market sentiment got boosted by data showing that foreign funds made heavy purchases in Indian stocks on Dec 19 (Thursday). In addition, positive comments from US outsourcing company Accenture helped lift IT stocks on Friday, with Tech Mahindra and Infosys hitting record highs. Despite chances of volatility due the approaching expiry of futures and options expiry on Thursday, Mangle said he expected the markets to inch higher in the coming week.
    
Meanwhile, Infosys is likely to be in focus on Monday due to the exit of board member and former chief of finance V. Balakrishnan. The company announced that Balakrishnan was stepping down on Friday, after being with the company for over two decades. His exit will not have any immediate impact on the business. But the stock may come under marginal pressure.

IT Stocks Outlook for the week - 16.12.2013 - 20.12.2013

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Stocks of information technology companies are likely to outperform an overall lacklustre market next week, with the broader market likely to see choppiness over growing fears of the US Federal Reserve scaling back its stimulus programme. IT stocks are likely to see more buyers next week, especially if the fall in indices this week carries forward. Stocks of IT companies are considered relatively safe, as the companies are largely immune to domestic demand issues. Moreover, the US, which accounts for about 60% of the revenue of tier-I information technology companies such as Infosys and TCS, has been doing better than expected in recent months. A report released by Commerce Department showing slightly stronger than expected (India) retail sales growth in, November added to the market worries. The migration to IT stocks was visible this week, with frontline IT shares rising 1-6%, while both Nifty and Sensex were down about 1.4%. The focus this week was on Infosys, which unveiled a new software platform aimed at retail companies. However, stocks of relatively smaller information technology companies such as HCL Technologies and
Wipro outperformed those of bigger rivals like Tata Consultancy Services and Infosys.

IT Stocks Outlook for the week - 09.12.2013 - 13.12.2013

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Stocks of information technology companies are likely to trade in a narrow range next week with a neutral bias following consolidation after the surge seen after the companies reported their quarterly performances. Stocks of information technology companies had touched their highs soon after the positive Jul-Sep results and have been consolidating after that. We don't expect any major movement in the stocks at least in the short term. On Wednesday, Wipro said it will discontinue manufacturing desktops, laptops and servers and will focus on its information technology solutions services business. The company said the decision was taken after evaluating the market scenario and market needs. Wipro, will, however, fulfil current deals' warranty and maintenance obligations. 

Wipro's exit from the hardware business will enhance value creation for its shareholders; apart from helping the company completely focus on its IT services business. Further, after market hours on Thursday, MphasiS reported a 9.12% year-on-year fall in consolidated net profit for Aug-Oct, due to a steep decline in other income, a sharp rise in finance cost, and a lower operating margin. Consolidated net profit of the Hewlett Packard-promoted company was down at 1.90 bln rupees, despite a 22.04% year on year rise in consolidated income from operations at 15.94 bln rupees. MphasiS' Chief Executive Officer Ganesh Ayyar also said the company will concentrate on bagging mid-to-large-sized deals going forward and not target smaller orders. 

IT Stocks Outlook for the week - 02.12.2013 - 06.12.2013

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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. 

IT Stocks Outlook for the week - 25.11.2013 - 29.11.2013

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Stocks of information technology companies are likely to trade in a range next week, with most stocks consolidating after the rise post reporting quarterly results, and on a stabilising rupee. The rupee has started stabilising against the dollar and thus most of the stocks are seen rangebound with a neutral bias. On Thursday, the rupee ended at a week's low against the dollar with the greenback strengthening globally, as minutes of the Federal Open Market Committee meet indicated that the monthly bond purchases could be scaled back soon. 

The minutes of the FOMC meet revealed that members considered tapering of the stimulus programme in the "coming months". However, yesterday, the rupee remained supported on dollar sales by state-owned banks and tracking the rise in the euro. On company specific stocks, Infosys saw yet another high profile exit. On Monday, Infosys said Stephen R. Pratt, head of utilities and resources, North America, and member of the executive council, has resigned and his resignation will be effective from Jan 31. Alexandre Elvis Rodrigues, regional head, energy and services, Americas, will replace Pratt. According to sources close to the development, Pratt quit to start his own entrepreneurial venture. 

On the same day, Mindtree also announced the appointment of Ramesh Pillai as senior vice-president and global head of its hi-tech vertical. The company also said it has appointed Mark Wilsdon as vice-president and head of sales of the UK and European Union regions. Series of senior management changes at Infosys and Mindtree are likely the peak of what it believes is a "change time" for the Indian IT industry. Movement of senior personnel in the industry - both within the domain as well as outside the services sector marks a turning point for the industry. 

Information technology vendors having stable top management teams are likely to do better on deal win momentum and revenue growth, they also agreed that the companies should be given credit for aligning their management teams to adjust to the changing needs of the industry.