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NEW DELHI: Are good days for Indian IT companies finally here On the face of it, robust quarterly numbers by global peers, optimistic guidance and sharp decline in the rupee do suggest so.
Take Accenture’s case for example.
The leading IT firm on Thursday posted strong quarterly numbers for the third quarter as the consulting and outsourcing services provider benefitted from its plan to boost investments in digital and cloud services.
The firm's revenue was up 11 per cent year-on-year in constant currency (cc) terms, much higher than the guidance of 6–8 per cent cc (16.3 per cent in dollar terms versus an estimate of 13.5 per cent).
This apart, Accenture raised its FY18 cc revenue growth guidance for a second consecutive quarter to 9.5–10 per cent, from 6–8 per cent in Q1FY18.
The guidance upgrade is strongest in five years.
Moreover, global IT companies EPAM and Luxoft had earlier posted a strong set of numbers for the fourth quarter of FY18, driven by huge spurt in BFSI (Banking, Financial Services and Insurance) segment.
The BFSI segment contributes nearly 40 per cent to Indian IT exports, and robust spurt in two consecutive quarters for EPAM and Luxoft indicates that the global economy is in recovery mode and could lead to a massive upgrade in Indian IT companies estimates, Edelweiss Securities said in a report.
The brokerage maintains 'buy' on Infosys, Tech Mahindra and HCL Technologies and ‘hold’ on TCS and Wipro.
Experts said that chances of more IT companies making buyback announcements such as TCS may further lift the IT counters.
Another brokerage firm Kotak Securities said the spending environment is healthy which can be seen positive.
However, the domestic IT industry growth depends on following points:-
> Ability to participate and capitalise on increasing scale of digital programs
> Portfolio mix i.e.
exposure to services facing severe deflationary exposure versus exposure to growth areas of digital and new services
> Client-specific challenges, especially in the financial services vertical.
"Our view remains unchanged -- 1-2 per cent acceleration in FY2019 industry growth rates," the brokerage says.
However, not all are bullish on the sector.
Santosh Singh, BFSI Head of Research at Haitong Securities, said he gets surprised when people say Accenture giving positive guidance means Indian IT companies should also benefit.
"Accenture has been outperforming most of the Indian IT companies for some time.
When the Indian IT stocks were giving negative commentary, Accenture was outperforming the analysts’ expectations."
There are definitely some positive fundamentals building into IT companies, but so have the valuations.
If rupee bleeds further, IT companies will surely benefit from it.
So it is a good time to buy into IT companies
Taher Badshah, CIO of Equities at Invesco Mutual Fund said the best time for IT was a year ago when there were contra ideas and compelling valuations.
"Accenture has consistently outperformed and upped their guidance over the last two-three quarters but the mix is considerably different.
Even within digital, it is more of the new digital compared to the old digital," Badshah noted.
