Sunday, September 01, 2013

Improving fortunes of global economy boon to Indian IT sector: SMC
~~By DK Aggarwal
Aug 31, 2013: Indian Information Technology sector fortunes look strong amid improvement in global economies such as US, UK and Europe along with the huge fall in the home currency.

Improvement in the consumer confidence and real economic conditions in the developed nations is expected to give good growth kick to the emerging nations in terms of higher exports including higher IT spends.

The spending on the technology and the related services on the worldwide basis was close to USD 1.9 trillion in year 2012, a growth of 4.8 per cent over the prior year. Out of the total spend, nearly USD 1 trillion got spend on IT, BPO and software products.

In the previous earnings season, the managements of the Indian Big giants were found to be more confident for the days to come.

Industry body the National Association of Software and Services Companies ( NASSCOM) expects the Indian IT sector to clock in growth of 12-14 per cent in revenues in dollar terms to $85 -87 billion in the fiscal year ending 2014.

With the addition of new clients, IT firms are seeing good deal pipelines which testify the belief that the improving health of the developed economies at the first point would lead to higher spending on the technology.

As regards to the performance of the Indian IT companies, TCS and Infosys numbers for the quarter ending June were higher than the estimates and Wipro numbers were in line with the expectations.

Even mid-size IT companies like Mindtree, KPIT Cummins, Hexaware Technologies posted good set of numbers and are expected to record good growth in the ensuing quarters.

So far, the stocks of the Indian information technology sector have not only outperformed on the bourses but also locked in good gains in short span of time.

The economic data from the developed nations is expected to show further improvement in days to come and after the huge fall in the home currency rupee to the levels of nearly 69, it looks that in the best case scenario the rupee would stay at least above the level of 60 to a dollar.

Therefore, it makes a strong case for the investors to remain 'overweight' on the IT stocks.

(The author is CMD, SMC Investments and Advisors limited. The views and recommendations expressed in this section are the analysts' own and do not represent those of