INSUBCONTINENT EXCLUSIVE:
Authors: JordanMUMBAI: Midcap IT stocks declined on Friday mirroring the 10% intra-day plunge at Hexaware Technologies, which faced a raft
of downgrades from analysts who believe the scrip doesn’t warrant multiples superior to its peer group.
Shares of Tata Elxsi, NIIT
Technologies, Sonata Software and Datamatics Global declined up to 8% on Friday
Hexaware maintained its guidance after robust quarterly earnings, prompting analysts to benchmark valuations of the company with those of
peers.
“We see several challenges to sustenance of valuations at the current levels,” said Ashish Chopra, analyst, Motilal Oswal
“The company may not benefit as much as peers in the near term from a depreciating INR, given that it is heavily hedged.”
The fall in
other stocks may be temporary, however
Higher IT budgets for the BFSI businesses and increasing adoption of digital technologies by enterprises indicate strong momentum for the IT
sector, said analysts.
“The Indian IT sector is poised to perform well over FY18-20 on the back of an improving global macro
environment,” said Milan Desai, analyst, IIFL
“The depreciating trend of the rupee will cushion the margins of IT companies.”
With acceleration in digital businesses, double-digit
earnings growth will soon become a reality for IT companies, said analysts.
“We believe large Indian IT companies are entering a V-shaped
earnings recovery phase enabled by huge digital-led demand, potential margin improvement and consistent buybacks,” said Sandip Agarwal,
analyst, Edelweiss Securities
“We reiterate our structural bullish call on the sector, led by a falling proportion of low-growth business being replaced by highgrowth
digital business”.
The BSE Information Technology index has surged 32% in the last one year compared to the 16% gains in benchmark
Sensex.
“We believe companies such as Majesco, Intellect Design, Nucleus, Oracle Financials and Ramco Systems will be key beneficiaries of
sector tailwinds in the software products business in general,” said Rahul Jain, analyst, Emkay Global.
“In our opinion, these companies
would deliver strong outperformance in growth on the back of their unique business positioning.”
