IT Stocks Outlook: Sideways next wk on weak guidance, rupee flux
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B. Karthick
Jul 26, 2008, 4:09:58 AM7/26/08
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IT Stocks Outlook: Sideways next wk on weak guidance, rupee flux
Saturday, Jul 26
Weak guidance from major information technology companies,
volatile movement of the rupee against the U.S. dollar and concerns
over the macro environment are likely to keep frontline IT stocks
range-bound next week.
Most IT companies' shares are likely to remain under-performers in
the near-term. Valuations are low as risks are partly priced in, but
uncertainty could limit near-term upside.
IT majors like Wipro and Satyam Computer Services have given
disappointing earnings guidance for Jul-Sep and barring a few, most
mid-cap IT companies have also reported disappointing Apr-Jun
earnings.
Moreover, guidance for the second quarter is weak-to-flat in most
cases.
IT shares could witness some value buying if the market sentiment
is positive and if the rupee falls against the greenback.
In case Reserve Bank of India's quarterly review of its monetary
policy for 2008-09 (Apr-Mar) on Tuesday dampens the market sentiment,
then the performance of IT shares may be subdued.
The central bank is expected to hike repo rate by at least 25bps
and also increase banks' cash reserve ratio as money supply growth is
above RBI's 2008-09 (Apr-Mar) target level of 16.5%-17.0%.
In addition, any further decline in global crude oil prices may
result in some portfolio churning in the IT sector.
We feel Tata Consultancy Services and Wipro stocks to 'hold with
medium risk', Infosys Technologies and Satyam Computer Services shares
to deliver best performance in the sector, despite a difficult
environment. We also favours HCL Technologies.
Movement in mid-cap shares is likely to remain stock-specific, and
the gains would solely depend on news from individual companies.
Week-on-week closing share prices of key IT companies, in rupees,
on National Stock Exchange:
Company Jul 25 Jul 18
Change (in %)
HCL Technologies 203.70 202.05 00.82
Infosys Technologies 1,550.65 1,547.40 00.21
Satyam Computer Services 374.45 383.55 (-)02.37
Tata Consultancy Services 799.20 793.85 00.67
Wipro 407.30 366.25
11.21
Saturday, Jul 26
Weak guidance from major information technology companies,
volatile movement of the rupee against the U.S. dollar and concerns
over the macro environment are likely to keep frontline IT stocks
range-bound next week.
Most IT companies' shares are likely to remain under-performers in
the near-term. Valuations are low as risks are partly priced in, but
uncertainty could limit near-term upside.
IT majors like Wipro and Satyam Computer Services have given
disappointing earnings guidance for Jul-Sep and barring a few, most
mid-cap IT companies have also reported disappointing Apr-Jun
earnings.
Moreover, guidance for the second quarter is weak-to-flat in most
cases.
IT shares could witness some value buying if the market sentiment
is positive and if the rupee falls against the greenback.
In case Reserve Bank of India's quarterly review of its monetary
policy for 2008-09 (Apr-Mar) on Tuesday dampens the market sentiment,
then the performance of IT shares may be subdued.
The central bank is expected to hike repo rate by at least 25bps
and also increase banks' cash reserve ratio as money supply growth is
above RBI's 2008-09 (Apr-Mar) target level of 16.5%-17.0%.
In addition, any further decline in global crude oil prices may
result in some portfolio churning in the IT sector.
We feel Tata Consultancy Services and Wipro stocks to 'hold with
medium risk', Infosys Technologies and Satyam Computer Services shares
to deliver best performance in the sector, despite a difficult
environment. We also favours HCL Technologies.
Movement in mid-cap shares is likely to remain stock-specific, and
the gains would solely depend on news from individual companies.
Week-on-week closing share prices of key IT companies, in rupees,
on National Stock Exchange:
Company Jul 25 Jul 18
Change (in %)
HCL Technologies 203.70 202.05 00.82
Infosys Technologies 1,550.65 1,547.40 00.21
Satyam Computer Services 374.45 383.55 (-)02.37
Tata Consultancy Services 799.20 793.85 00.67
Wipro 407.30 366.25
11.21
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