Major information technology firms are expected to post decent revenue growth and may come up with a surprise for the fourth quarter of fiscal 2007-08, analysts say.
The rupee had depreciated against the dollar in the last quarter after continually appreciating for the past three quarters, this reversal is likely to help the revenue growth this quarter, domestic brokerage Sharekhan said in its IT earnings preview.
"The frontline tech stocks are expected to show a sequential revenue growth of 5-8 per cent during the fourth quarter ended March 2008, driven by a 4-7 per cent growth in the volumes aided by the depreciation of rupee by around 90 basis points over Q3 FY2008," the Sharekhan report stated.
The average exchange rate of Rs 39.8 against the dollar is also above the assumption of Rs 39.3-39.4 made by the domestic companies. This would aid the growth of IT companies in the fourth quarter of FY2007-08, it added.
However, analysts believe that in the long run the appreciation of the rupee against dollar continues to be a cause for concern.
IT major Infosys would kickstart the quarterly earnings season from April 15 along with HCL Technologies, followed by Satyam Computer Services on April 21.
"Forward earnings for most of the companies are healthy. The IT sector might come out with surprises following the Infosys results, which are likely to give a new direction to the markets," SMC Global Vice President Rajesh Jain said.
The Sharekhan report stated that in terms of earnings the guidance for Infosys is likely to be in the range of 17-19 per cent factoring in the decline of around 50-60 basis points in margins and the further dilution of equity (due to stock options).
While, for Satyam Computers, the brokerage firm expects higher growth guidance with 23-24 per cent in revenues and 21-22 per cent in earnings, on the back of the strong growth momentum in its enterprise solutions business.
On the other hand, Tata Consultancy Services is expected to lag behind due to customer specific issues, whereas HCL Technologies could face pressure on its earnings growth due to foreign exchange fluctuation.
Besides, the stocks of IT firms have been among the major losers in the past quarter due to the meltdown in the markets during the January-March period. The key factors dragging down the technology stocks have been the global and domestic cues giving mixed signals on the overall demand outlook resulting in continued uncertainty.
Infosys scrip lost 15 per cent from Rs 1749.70 on January 1 to Rs 1482.90 on April 4, while shares of Satyam, TCS and HCL Technologies also fell between 5 to 24 per cent in the period.
