Infosys, TCS, HCL extend fall on outlook worries:
NEW DELHI: Shares of top technology companies such as Infosys, TCSBSE -1.85 % and WiproBSE -1.31 %extended their intraday losses for second day in a row on Thursday after Cognizant Technology Solutionshinted at slower growth in 2013.
At 12:30 pm, InfosysBSE -2.39 % Ltd was trading 2.4 per cent lower at Rs 2323.50. It has hit a low of Rs 2315.50 and a high of Rs 2398 in trade today.
Tata Consultancy ServicesBSE -1.85 % was trading 2 per cent lower at Rs 1271. It has hit a low of Rs 1268.05 and a high of Rs 1298.05 in trade today. While Wipro dropped 1.08 per cent to Rs 376.90.
HCL TechnologiesBSE -2.94 % was trading 2.9 per cent lower at Rs 620. It has hit a low of Rs 619 and a high of Rs 640.05 in trade today.
Cognizant Technology Solutions Corp, in a filing to the SEC on Tuesday, said its top executives will receive 100 percent of their performance-linked shares if the company achieves revenue of $8.5 billion next year, a 16 percent rise over its projected 2012 revenue.
We have compiled views from various brokerage firms on Cognizant report and how it could impact the India IT sector in 2013:
IDFC:
The filing implies that CY13 growth would be lower than the company's outlook for CY12. "Based on historical trends, Cognizant's annual guidance corresponds with revenue growth corresponding to 100 percent of performance units," IDFCBSE -1.15 % said in a note.
Barclays Capital:
Barclays Capital, however, feels that while Cognizant may see a slowdown, it does not pose an incremental risk to Barclays' FY14 growth forecasts of 15 percent for TCS and 13 percent for HCL Tech.
"Cognizant's growth premium to Indian IT vendors has diminished in the past two years due to its larger revenue and growth base," Barclays Capital said in a note.
JPMorgan:
JPMorgan is of the view that the industry demand is likely to remain stable and not falling off by any means; polarization in performance is still the order of the day.
The brokerage firm feels that 2013 could be a better year for IT industry than 2012. New contract wins, rise in discretionary spending, legacy deals opening up in 2013, stability of client budgets could constitute the trigger points.
If the effect of these ingredients exceeds our expectations, then reasonably valued stocks of laggards such as Infosys, Wipro and select mid-caps could give meaningful upsides. We remain neutral on TCS and overweight on HCL Technologies.
Nomura:
We view this development (Cognizant) as negative for Indian IT industry where there are expectations of revenue growth acceleration being built in by consensus for the next year.
We see higher risk to these expectations at Infosys and Wipro where revenue growth rates assumed in FY14F are more than double that assumed for FY13F
Rupee Impact:
An additional negative may come from the rupee. Credit Agricole believes the government winning the vote onforeign direct investment in multi-brand retail will continue to help rupee.
The brokerage firm expects the rupee could rise to 52 per dollar by end 2013.
At 12:30 pm, InfosysBSE -2.39 % Ltd was trading 2.4 per cent lower at Rs 2323.50. It has hit a low of Rs 2315.50 and a high of Rs 2398 in trade today.
Tata Consultancy ServicesBSE -1.85 % was trading 2 per cent lower at Rs 1271. It has hit a low of Rs 1268.05 and a high of Rs 1298.05 in trade today. While Wipro dropped 1.08 per cent to Rs 376.90.
HCL TechnologiesBSE -2.94 % was trading 2.9 per cent lower at Rs 620. It has hit a low of Rs 619 and a high of Rs 640.05 in trade today.
Cognizant Technology Solutions Corp, in a filing to the SEC on Tuesday, said its top executives will receive 100 percent of their performance-linked shares if the company achieves revenue of $8.5 billion next year, a 16 percent rise over its projected 2012 revenue.
We have compiled views from various brokerage firms on Cognizant report and how it could impact the India IT sector in 2013:
IDFC:
The filing implies that CY13 growth would be lower than the company's outlook for CY12. "Based on historical trends, Cognizant's annual guidance corresponds with revenue growth corresponding to 100 percent of performance units," IDFCBSE -1.15 % said in a note.
Barclays Capital:
Barclays Capital, however, feels that while Cognizant may see a slowdown, it does not pose an incremental risk to Barclays' FY14 growth forecasts of 15 percent for TCS and 13 percent for HCL Tech.
"Cognizant's growth premium to Indian IT vendors has diminished in the past two years due to its larger revenue and growth base," Barclays Capital said in a note.
JPMorgan:
JPMorgan is of the view that the industry demand is likely to remain stable and not falling off by any means; polarization in performance is still the order of the day.
The brokerage firm feels that 2013 could be a better year for IT industry than 2012. New contract wins, rise in discretionary spending, legacy deals opening up in 2013, stability of client budgets could constitute the trigger points.
If the effect of these ingredients exceeds our expectations, then reasonably valued stocks of laggards such as Infosys, Wipro and select mid-caps could give meaningful upsides. We remain neutral on TCS and overweight on HCL Technologies.
Nomura:
We view this development (Cognizant) as negative for Indian IT industry where there are expectations of revenue growth acceleration being built in by consensus for the next year.
We see higher risk to these expectations at Infosys and Wipro where revenue growth rates assumed in FY14F are more than double that assumed for FY13F
Rupee Impact:
An additional negative may come from the rupee. Credit Agricole believes the government winning the vote onforeign direct investment in multi-brand retail will continue to help rupee.
The brokerage firm expects the rupee could rise to 52 per dollar by end 2013.
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