IT majors likely to log 6.9 percent growth in sales

By siliconindia   |   Wednesday, 23 January 2008, 23:21 IST
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Mumbai: Top IT companies may log a 6.9 percent rise in sales in the October-December quarter. The analysts considered the growth reasonably strong in a period that registered a comparatively slow process of growth in the past many years, reported The Economic Times. Earnings growth usually gets slowed down in the October-December quarter, as there are lesser billing days because of more number of holidays. As a result, analysts feel investors are unlikely to base their sectoral investment decisions on this quarter. And also concerns over a recession in the U.S. It is feared that a recession is likely to lead to a cut in IT budgets of U.S. companies, especially in banking and finance. "Though investors may discount any positive data points from the December quarter results, given the uncertainty around technology spending in the U.S. for 2008, any negative data points could be extrapolated as a sign of an impending U.S. slowdown or weakness," said Morgan Stanley in a pre-earnings note. A key aspect that the market would be looking for at this juncture is the recruitment figures, as companies hire more in anticipation of increased business prospects. "We do not expect any definitive indication on demand going into FY09 and the earliest indication of that demand would be from Cognizant's results expected on Jan 18th, 2008. The market might have to wait for Q4 results to get a more definitive idea on demand trends for FY09," Ambit Capital said in a pre-earnings note. Brokerage firm CLSA said investors may need to wait till January end to gain a concrete idea about the trends in off-shoring demand. "Past slowdowns have been identified in the February-March period rather than in November-December, lending credence to the overall waiting stance pre-full year guidance in April from Infosys and Satyam," CLSA said. Analysts expect improvement in companies' operating margins, though marginal, thanks to the limited appreciation in the rupee against the dollar. But, industry margins may be divergent because of different currency hedging strategies and that companies have taken wage hikes into their books at various periods

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