The results of tech companies will start coming from next week. Tata Consultancy Services, Infosys, HCL Technologies and Wipro will present their third quarter results next week. Experts say that despite the seasonal factor, the earnings of IT companies can be seen in the third quarter. Due to increasing digitization, there has been a strong growth in demand, which will benefit these companies. Apart from this, the veterans also believe that in the third quarter, the performance of mid-cap IT companies will be much better than before.
Let us inform that in 2021, the Nifty IT index has seen a rise of 60 percent, while the Nifty IT index has seen a rise of 10.5 percent in the quarter ended 31 December 2021. The IT index has outperformed the Nifty 50 as well as other sectoral indices.
Nifty has lost 1.5 per cent in the December quarter on the back of high valuations and tightening of US Fed’s monetary policies. Tech Mahindra has been the top gainer of the IT pack in the December quarter. Tech Mahindra has seen a rise of 30 per cent in this period. The second number has been L&T Infotech, which has seen a gain of 27 percent.
On the other hand, Mindtree, Wipro, Infosys and Coforge have seen a rally of 12-14 per cent, while HCL Technologies has seen a rise of 3 per cent. On the other hand, TCS has underperformed in this period and has seen a decline of 1 per cent.
Experts say that the third quarter (October-December) of FY 2022 will prove to be another strong quarter for the largecap companies of the IT sector. During this period, the revenue of large-cap IT companies can see an increase of 2.5 to 4 per cent in the constant currency term, while the revenue of mid-cap IT companies can see an increase of 3.5-6.5 per cent in the same period.
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In the December quarter, the dollar revenue growth of IT companies is likely to see a growth of 2-3.3 percent on a quarterly basis. It is worth noting that due to Christmas and New Year holiday, the month of December remains sluggish for IT companies.
Experts believe that Infosys and L&T Technology may increase their revenue growth guidance for FY 2022. Kotak Securities says that Infosys can keep its guidance for the entire financial year at 17-17.5 per cent, which was earlier at 16.5-17.5 per cent.
Looking at the brokerage house picks, Emkay recommends betting on Tier 1 companies like Infosys, TCS, HCL Technologies and Tech Mahindra and midcap companies like Route Mobile, Mphasis, Firstsource Solutions, e-Clerx Services, Persistent Systems and Birlasoft .
On the other hand, Motilal Oswal says that it sees a better Tier 1 company due to its attractive valuation. Tier-I companies include Infosys, HCL Technologies and TCS among the likes of Motilal Oswal. On the other hand, among Tier II companies, L&T Technology Services and Zen Technologies are on the shopping list of Motilal Oswal.
Kotak Mahindra is also bullish on the IT sector. However, he also believes that now moderate returns will be seen in this sector. Kotak’s shopping list includes Infosys, HCL Technologies and Mphasis as top picks.
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