Indian IT services likely to see muted growth, negative surprises in Q3 - analysts

KPIT Technologies

02/01/2023 06:19

** Indian IT services firms' Q3 revenue growth will likely
be muted at 0%-3% Q/Q due to deteriorating macroeconomic
situation and furloughs in Dec qtr - Kotak Institutional
Equities 
    ** Tata Consultancy Services  TCS.NS  and HCL Tech  HCLT.NS 
should report relatively better qtr, while Tech Mahindra
 TEML.NS  and Mphasis  MBFL.NS  should lag - Kotak
    ** The Nifty IT index  .NIFTYIT  was down 0.2% on Monday,
2023's first trading session 
    ** Furloughs have been higher than usual, especially in
hi-tech segment; certain segments like non-essential retail,
telecom, and financial services may slow down, the brokerage
said
    ** Analysts from Investec see potential for negative
surprises across the board on revenue, led by higher furloughs,
pressure on existing order book 
    ** KPIT Technologies  KPIE.NS  likely the only standout
demonstrating revenue resilience, Investec analysts added
    ** Overall, Q3 performance likely to drive caution for IT
and demand commentary could get incrementally weak - Investec
    ** IT stocks  .NIFTYIT  fell over 25% in 2022 on recession
fears in U.S. after the Federal Reserve initiated the rate hike
cycle in the first half of 2022
    ** TCS will kick-off qtrly results for Dec qtr on Jan 9; 
 (Reporting by Nallur Sethuraman in Bengaluru)
 ((Sethuraman.NR@thomsonreuters.com; (+91 8061822737); Reuters
Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))