IT Stocks Outlook: Steady; Cognizant guidance improves mood
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K.Karthik Raja
Feb 10, 2008, 11:39:14 PM2/10/08
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IT Stocks Outlook: Steady; Cognizant guidance improves mood
MUMBAI - Information technology shares are seen moving in a range
of 5% of current levels taking positive signal from Cognizant
Technology Solutions "aggressive" guidance for 2008.
The technology counter, reeling under pressure from U.S. economic
slowdown, will likely be steady during the week even as the broader
equity market is seen volatile.
The Nasdaq-listed IT outsourcing firm Thursday said it expects a
38% growth in revenue and 30-32% rise in profit in 2008. Analysts had
earlier said an above 35% expected rise in revenue would help Indian
IT counters rise between 10-20% over few weeks.
Cognizant derives nearly 81% of its revenue from the U.S., and
over 45% from banking and financial sector. Growth in both these
segments has been under the scanner after the U.S. sub-prime crisis.
Today, CNX IT Index rose 3%, with HCL Technologies, Infosys
Technologies, and Satyam Computer Services rose 5% each.
However, research believe that the sector may shed today's gain,
as the U.S. economy still remains a concern.
Cognizant said client budgets in 2008 are seen flat to marginally
up.
While this is a relief for investors anticipating cuts in
discretionary
spends, it is still not an undiluted positive for the market.
Thursday, Tata Consultancy Services Managing Director and Chief
Executive Officer S. Ramadorai said the aggressive rate cuts by the
U.S. Federal Reserve showed that caution on the U.S. business
environment is "very much called for".
While detailing Oct-Dec result in January, the company had said it
was cautiously optimistic about the future, which was interpreted as
likely slowdown in growth by most analysts.
U.S. economic data during this week has been pointing to weakening
of the world's largest economy, but investor hopes have been sustained
on likely mergers and acquisitions and as further rate cuts by the Fed
are unlikely.
BUSINESS OUTLOOK
The market seems rife with talk of large deals, and as such the
business outlook in the near term for the sector seems intact. This
week a research report hinting at HCL Technologies bagging a $500-mln
deal from BT.
Talk of another large deal for TCS is still doing the rounds.
Tech Mahindra is seen as the only loser in this process as talk is
that HCL's deal would be undercutting potential business for Tech
Mahindra.
Analysts are also hopeful that the Union Budget 2008 may see
extension of tax sops for IT firms under the Software Technology Parks
of India scheme,which is scheduled for expiry in Mar 2009.
Industry officials, however, believe that some tax benefits may be
extended to small companies, but the large players are going to become
taxable after STPI expires.
Week-on-week closing prices of key software shares, in rupees, on
National Stock Exchange:
.
Company Feb 8 Jan 31 Change
(in %)
HCL Technologies 257.35 265.95
(3.2)
Infosys Technologies 1,552.35 1,594.60
(2.6)
Satyam Computer Services 409.55 421.20
(2.8)
Tata Consultancy Services 898.40 929.50
(3.3)
Wipro 422.10 440.05
(4.1)
.
INDICES
CNX IT Index 3,961.05 4,074.15
(2.8)
NSE Nifty 5,120.35 5,317.25
(3.7)
BSE Sensex 17,464.89 18,242.58
(4.3)
MUMBAI - Information technology shares are seen moving in a range
of 5% of current levels taking positive signal from Cognizant
Technology Solutions "aggressive" guidance for 2008.
The technology counter, reeling under pressure from U.S. economic
slowdown, will likely be steady during the week even as the broader
equity market is seen volatile.
The Nasdaq-listed IT outsourcing firm Thursday said it expects a
38% growth in revenue and 30-32% rise in profit in 2008. Analysts had
earlier said an above 35% expected rise in revenue would help Indian
IT counters rise between 10-20% over few weeks.
Cognizant derives nearly 81% of its revenue from the U.S., and
over 45% from banking and financial sector. Growth in both these
segments has been under the scanner after the U.S. sub-prime crisis.
Today, CNX IT Index rose 3%, with HCL Technologies, Infosys
Technologies, and Satyam Computer Services rose 5% each.
However, research believe that the sector may shed today's gain,
as the U.S. economy still remains a concern.
Cognizant said client budgets in 2008 are seen flat to marginally
up.
While this is a relief for investors anticipating cuts in
discretionary
spends, it is still not an undiluted positive for the market.
Thursday, Tata Consultancy Services Managing Director and Chief
Executive Officer S. Ramadorai said the aggressive rate cuts by the
U.S. Federal Reserve showed that caution on the U.S. business
environment is "very much called for".
While detailing Oct-Dec result in January, the company had said it
was cautiously optimistic about the future, which was interpreted as
likely slowdown in growth by most analysts.
U.S. economic data during this week has been pointing to weakening
of the world's largest economy, but investor hopes have been sustained
on likely mergers and acquisitions and as further rate cuts by the Fed
are unlikely.
BUSINESS OUTLOOK
The market seems rife with talk of large deals, and as such the
business outlook in the near term for the sector seems intact. This
week a research report hinting at HCL Technologies bagging a $500-mln
deal from BT.
Talk of another large deal for TCS is still doing the rounds.
Tech Mahindra is seen as the only loser in this process as talk is
that HCL's deal would be undercutting potential business for Tech
Mahindra.
Analysts are also hopeful that the Union Budget 2008 may see
extension of tax sops for IT firms under the Software Technology Parks
of India scheme,which is scheduled for expiry in Mar 2009.
Industry officials, however, believe that some tax benefits may be
extended to small companies, but the large players are going to become
taxable after STPI expires.
Week-on-week closing prices of key software shares, in rupees, on
National Stock Exchange:
.
Company Feb 8 Jan 31 Change
(in %)
HCL Technologies 257.35 265.95
(3.2)
Infosys Technologies 1,552.35 1,594.60
(2.6)
Satyam Computer Services 409.55 421.20
(2.8)
Tata Consultancy Services 898.40 929.50
(3.3)
Wipro 422.10 440.05
(4.1)
.
INDICES
CNX IT Index 3,961.05 4,074.15
(2.8)
NSE Nifty 5,120.35 5,317.25
(3.7)
BSE Sensex 17,464.89 18,242.58
(4.3)
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