Despite some near term hiccups, overall trend is positive thanks to improving macro environment in the US
For Indian IT companies prospects for a better FY15F is intact as overall macro trends are positive, despite some near term hiccups. Macro indicators in US suggest a possible acceleration in IT services demand in FY15F with:
(a) client financial performance suggests broad based improvement across industries (except Retail and Oil & Gas) – should reflect in improving demand with a 2-3 quarter lag;
(b) Steady uptrend in US consumer confidence and stability in US CEO confidence index; and
(c) continuing decline in jobless claims and the unemployment rate.
On Indian IT companies, in particular, Nomura says that Tier-1 IT aggregate revenue growth bottomed in September 2012 at 10% year-on-year levels and has since improved to 14-15% year-on-year in second half of 2013. Nomura looks for 16% organic revenue growth in FY15F versus 13.5% in FY14F.
IT companies that provide revenue upside possibility with margin comfort and are available at reasonable valuations are preferred in the stock market, says Nomura in its research note
YTD (year-to-date), the IT sector has marginally out-performed Nifty. Valuations for Tier 1 IT at 18x 1-year forward are at a 10% premium to five-year averages and are not expensive
Finally, on stock recommendations, Nomura’s research note says, “Our pecking order of preference within our Buys is HCL Technologies followed by Tata Consultancy Services (TCS), Tech Mahindra, Cognizant and Infosys. We switch preference to TCS over Cognizant on higher upsides. Wipro is our least preferred stock in Tier 1 IT.”
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
