Indian IT sector is set to post another quarter of strong growth despite cost pressure. Market watchers believe that increasing the speed of digital transformation or shifting to the cloud, improving deal pipeline, and investment in the hyperscalers. SaaS ecosystems are likely to support the top line and bottom line.
With a rally of 10.49 per cent, the Nifty IT index outperformed the benchmark Nifty 50 index (down 1.50 per cent) in the third quarter. Shares of IT majors Infosys and Wipro gained 12.69 percent and 12.81 per cent, respectively.
During the October-December period. TCS declined 0.99 per cent to Rs 3,738.35 on December 31, 2021 from Rs 3775.55 on September 30, 2021. These companies are slated to announce their financial results on January 12, Wednesday.
On the back of deal ramp-ups, IT transformational spending, and sustained deal closure activity across the sector. Reliance Securities sees continued strong revenue momentum. However, it expects increased pressure on EBITDA margins as a result of higher employee incentives, wage increases to retain talent amid high attrition, lower utilization as a result of aggressive new hires, and stable SG&A costs.
TCS, Infosys, and Wipro’s Q3 earnings are expected to be as follows, according to brokerages:
“We expect Infosys to raise its FY22 revenue growth guidance to 17-17.5 percent (up from 16.5-17.5 percent previously) and reiterate FY22 EBIT margin in the range of 22-25 percent,” according to Reliance Securities.
Market participants should keep an eye on large deal activity, the BFSI vertical’s outlook, attrition trends, and capital allocation policy for updates.
In Wipro’s quarterly results, investors should keep an eye on the company’s large deal win momentum, pricing trends, and outlook for the BFSI and retail verticals.
Revenue growth is expected to be 30.30 percent year over year and 3.80 percent quarter over quarter, according to YES Securities. Profit after tax, on the other hand, is up 3.6 percent year over year and 4.9 percent quarter over quarter. Guidance for Q4FY22, as well as comments on mergers and acquisitions and large deal wins, would be crucial.