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Economic Times
4 days ago
- Business
- Economic Times
Dollar's slide may help IT add 70–300 basis points to Q1 revenues
ETtech Currency is set to overshadow volumes as growth drivers in the June-quarter toplines at Indian tech powerhouses, with a falling dollar giving the anticipated tepid sales some much-needed ballast amid an evident revenue slack in the industry's traditional money spinners either side of the Atlantic.A retreat for the dollar, which gives the rupee a tailwind, should boost Indian tech revenues by 70-300 basis points in the June quarter, analysts said. One basis point is a hundredth of a percentage point. The currency impact cited above, therefore, should expand revenues by 0.7 to 3 percentage the April-June quarter, most major currencies have appreciated on average versus the US Dollar (USD). For instance, the Indian Rupee (INR) appreciated 1%, the Pound Sterling (GBP) 6.2%, the Euro (EUR) 8%, the Australian Dollar (AUD) 2.6% and the Japanese Yen (JPY) grew 5.5%. A weak dollar against a basket of currencies will lead to 100-200 bps of on-quarter cross-currency tailwinds, Motilal Oswal said in a report. HSBC Global Research estimates the impact to range between 80-450 basis points. These movements are higher for companies with greater exposure to EUR, GBP and JPY such as Tata Consultancy Services (TCS), HCL Technologies, Coforge, KPIT, data from Kotak Institutional Equities showed. Currency movements are crucial because Indian IT firms earn a large share of their revenues in foreign currencies but spend in INR -- most of it on employee wages in India. Typically, a stronger dollar helps gain more revenues as most IT majors' over 40-50% revenue comes from the US. However, when the dollar weakens against other currencies such as GBP, EUR, or JPY, revenues earned in those regions helps boost the reported toplines in instance, India's largest software service provider, TCS, has the least dollar dependency among tier-1 companies and derives 50% of its revenues from non-USD currencies. It is expected to net a 211 basis points revenue upside in the second quarter of the ongoing fiscal. The maximum positive impact could be recorded by mid-sized firm KPIT at 299 basis points because it derives a substantial 72% of its revenues from non-USD markets, data by Kotak Institutional Equities showed."During the quarter, the Indian rupee has appreciated around 1% against the dollar which typically is not beneficial for exporters,' said Sumit Pokharna, IT analyst with Kotak Securities. 'However, the rupee has depreciated against other currencies in the 2.5-8% range. This is providing tailwinds for software services exporters on the US$ revenue growth from the previous quarter.'He added that tighter controls by companies on travel costs and hikes and some pulling back on compensation, will aid margins stability for large IT companies while expansion for select mid IT at a time when discretionary spending remains muted, and deal closure timelines are elongated, the exposure to other currencies is helping IT firms, Pokharna the flip side, companies like Persistent Systems and Mphasis, which have among the highest exposure to the US at 85% and 82%, respectively, the sequential benefit of the currency movement will be contained at 69 basis points and 75 basis points, respectively. Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Markets need to see more than profits from Oyo Can Grasim's anti-competition charge against Asian Paints stand amid intense war Engine fuel switches or something else? One month on, still no word on what crashed AI 171 Delhivery survived the Meesho curveball. Can it keep on delivering profits? Stock Radar: Page Industries breaks out from Cup & Handle formation; stock hits fresh 52-week high For risk-takers with ability to stay invested for the long term: 5 small-caps from different sectors with upside potential of 5 to 32% Multibagger or IBC - Part 14: This auto ancillary with double-digit net margins is now getting EV-focused These mid-cap stocks with 'Strong Buy' & 'Buy' recos can rally over 25%, according to analysts
Time of India
4 days ago
- Business
- Time of India
Dollar's slide may help IT add 70–300 basis points to Q1 revenues
Academy Empower your mind, elevate your skills ETtech Currency is set to overshadow volumes as growth drivers in the June-quarter toplines at Indian tech powerhouses, with a falling dollar giving the anticipated tepid sales some much-needed ballast amid an evident revenue slack in the industry's traditional money spinners either side of the Atlantic.A retreat for the dollar, which gives the rupee a tailwind, should boost Indian tech revenues by 70-300 basis points in the June quarter, analysts basis point is a hundredth of a percentage currency impact cited above, therefore, should expand revenues by 0.7 to 3 percentage the April-June quarter, most major currencies have appreciated on average versus the US Dollar (USD). For instance, the Indian Rupee (INR) appreciated 1%, the Pound Sterling (GBP) 6.2%, the Euro (EUR) 8%, the Australian Dollar (AUD) 2.6% and the Japanese Yen (JPY) grew 5.5%.A weak dollar against a basket of currencies will lead to 100-200 bps of on-quarter cross-currency tailwinds, Motilal Oswal said in a report. HSBC Global Research estimates the impact to range between 80-450 basis points. These movements are higher for companies with greater exposure to EUR, GBP and JPY such as Tata Consultancy Services (TCS), HCL Technologies Coforge , KPIT, data from Kotak Institutional Equities movements are crucial because Indian IT firms earn a large share of their revenues in foreign currencies but spend in INR -- most of it on employee wages in India. Typically, a stronger dollar helps gain more revenues as most IT majors' over 40-50% revenue comes from the US. However, when the dollar weakens against other currencies such as GBP, EUR, or JPY, revenues earned in those regions helps boost the reported toplines in instance, India's largest software service provider, TCS, has the least dollar dependency among tier-1 companies and derives 50% of its revenues from non-USD currencies. It is expected to net a 211 basis points revenue upside in the second quarter of the ongoing fiscal. The maximum positive impact could be recorded by mid-sized firm KPIT at 299 basis points because it derives a substantial 72% of its revenues from non-USD markets, data by Kotak Institutional Equities showed."During the quarter, the Indian rupee has appreciated around 1% against the dollar which typically is not beneficial for exporters,' said Sumit Pokharna, IT analyst with Kotak Securities. 'However, the rupee has depreciated against other currencies in the 2.5-8% range. This is providing tailwinds for software services exporters on the US$ revenue growth from the previous quarter.'He added that tighter controls by companies on travel costs and hikes and some pulling back on compensation, will aid margins stability for large IT companies while expansion for select mid IT at a time when discretionary spending remains muted, and deal closure timelines are elongated, the exposure to other currencies is helping IT firms, Pokharna the flip side, companies like Persistent Systems and Mphasis, which have among the highest exposure to the US at 85% and 82%, respectively, the sequential benefit of the currency movement will be contained at 69 basis points and 75 basis points, respectively.
News18
15-05-2025
- Business
- News18
TCS Shares Falling Behind Peers, Tata Group Stocks: What's Dragging Down The IT Bellwether?
Last Updated: TCS underperformed in the past year, with its shares falling 10%, trailing key IT peers like Infosys, HCL Tech, and Wipro; Here's why Tata Consultancy Services Share Price: For years, Tata Consultancy Services (TCS) has stood as the flagship performer of the Tata Group—widely regarded as a symbol of stability, consistent earnings growth, and long-term value creation. However, the IT major has seen its shine dim over the past year. TCS shares have declined 10%, significantly underperforming not only key IT peers such as Infosys (up 12%), HCL Tech (up 24%), and Wipro (up 11%), but also most other Tata Group companies. In contrast, the Nifty IT index has risen over 15% during the same period. Within the Tata stable, TCS now finds itself trailing most group stocks, with only Tata Motors, Tata Elxsi, and Tata Technologies posting weaker performance. TCS's performance over the past year, though positive, has been overshadowed by the exceptional gains of other Tata Group companies. Factors such as global economic uncertainties and sector-specific challenges have impacted its growth trajectory. TCS's recent underperformance stems from a combination of external pressures and internal hurdles. Globally, the tech sector has been navigating uncertainty, with economic slowdowns in key markets like the US and Europe — TCS's primary revenue sources — curbing client spending. Inflation, elevated interest rates, and geopolitical tensions have further dampened discretionary and transformational IT investments. On the internal front, TCS has faced client-specific setbacks. The high-profile BSNL contract, once a major revenue driver, is now being scaled down, impacting the company's top line. Additionally, slower deal conversions and delays in decision-making across sectors such as retail, manufacturing, and healthcare have further weighed on revenue growth. From Leader to Laggard: Why Is TCS Falling Behind Its Peers? TCS has reported slower deal conversions and prolonged decision-making cycles across key sectors like retail, manufacturing, and healthcare, putting further pressure on revenue growth. Sumit Pokharna, VP–Fundamental Research (IT) at Kotak Securities, pointed out that TCS's management has acknowledged challenges in client spending, particularly in retail, manufacturing, and insurance. 'IT services spending growth is likely to fall below our base-case assumption of 4–5% in FY26, with delays in project executions," he noted. While TCS has struggled with growth headwinds, its peers have shown stronger momentum. HCL Tech's strategic focus on high-growth areas such as digital transformation and cloud services has delivered tangible results. Infosys continues to maintain robust deal wins, and Wipro's aggressive M&A strategy has helped broaden its client base and geographical reach. Sushovon Nayak, Research Analyst at Anand Rathi Institutional Equities, told News18: 'Deferrals in client spending—especially in the retail and manufacturing sectors—amid tariff uncertainties, as highlighted in TCS's Q4 FY25 commentary, along with client-specific challenges such as the BSNL ramp-down, have significantly weighed on the company's growth trajectory. These factors have collectively contributed to the stock's underperformance." He added: 'However, if the US-China trade deal progresses positively, we could witness a revival in discretionary IT spending, which may support improved growth prospects for TCS going forward." Light At The End Of The Tunnel For TCS? Following TCS's Q4 FY25 results, analysts at HSBC Securities and Capital Markets (India) noted that US tariffs and Jaguar Land Rover's (JLR) ageing portfolio are likely to weigh on growth in FY26. They warned that margins may disappoint as well. In the domestic automotive segment, Tata Motors — a key part of the Tata Group — faces continued competitive pressure in the passenger vehicle (PV) market, while the recovery in the commercial vehicle (CV) cycle remains sluggish. With limited near-term catalysts, HSBC downgraded Tata Motors to a 'Hold" rating (from 'Buy"), even as it raised the target price to Rs 770 from Rs 700. Jefferies India echoed similar concerns, noting that Tata Motors is headed for a challenging year. While Q4 EBITDA declined, it still came in 4% above Jefferies' estimates. The dip was attributed primarily to weaker JLR margins. 'JLR is expected to face headwinds in the coming year due to US tariffs, intensifying competition in China, and rising customer acquisition costs. India's CV demand has also slowed, while the electric PV segment is seeing increasing competition," Jefferies said. As a result, Jefferies has cut its FY26–27 EBITDA estimates for Tata Motors by 8%, though it raised earnings per share projections by 3–4%. The brokerage retained its 'Underperform' rating, with a revised target price of Rs 630. Disclaimer:Disclaimer: The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions. Stay updated with all the latest news on the Stock Market, including market trends, Sensex and Nifty updates, top gainers and losers, and expert analysis. Get real-time insights, financial reports, and investment strategies—only on News18. First Published:
Mint
24-04-2025
- Business
- Mint
In charts: Sombre mood grips India's top IT firms amid tariff tantrums
When the US sneezes, the world catches a cold—and so does India's information technology (IT) sector, which depends heavily on the world's largest economy. This time, uncertainties surrounding US-imposed tariffs—likely to fuel inflation and trigger a broader global slowdown—are casting a shadow over the sector's outlook. A Mint analysis of the transcripts of the earnings conference calls by the big four of the IT industry—Tata Consultancy Services (TCS), Wipro Ltd, Infosys Ltd, and HCL Technologies—shows that conversations about artificial intelligence (AI), uncertainty and tariffs dominated discussions in the fiscal fourth quarter (Q4FY25). Read this | Big Four of Indian IT lose market share; HCL Tech's outlook offers little relief While the conversations around AI and GenAI were largely positive, a significant increase in the usage of words like uncertainties (59 times in Q4 vs 10 times in Q3) and tariffs (29 times in Q4 as opposed to just once in Q3) indicates a more cautious tone, reflecting expectations of a slower 2025–26. Company guidance has already factored in the potential risks. "Broadly speaking, even a minor slowdown (in the US) poses a significant problem. The US-based companies will likely postpone IT investments, focusing only on essential core development and avoiding discretionary spending," said Sumit Pokharna, vice president at Kotak Securities. Read this | India's Big Five IT firms were looking forward to rebound. Now all bets are off. The cracks are already showing: the number of clients generating over $100 million in trailing 12-month revenue for India's top four IT firms has dropped to a six-quarter low of 142. After clocking double-digit growth in FY22 and FY23, revenue at India's top IT firms has slowed to low single digits over the past two years. In Q4FY25, revenues at three of the big four fell by 0.8–3.5% from the previous quarter, underscoring the impact of a major disruption. A report by Emkay Global, dated 21 April, highlighted that the IT companies had not reported negative sequential growth rates outside recessions witnessed during the global crisis of 2008 or the 2020 pandemic. Read this | HCL Q4: Positives in play, but the downgrades keep coming While these firms posted sequential growth in total contract value in Q4, they failed to match year-ago levels. Experts warn that many of these deals, likely signed before the tariff escalations, now face the risk of delay. After a period of relative stability, attrition rates—the proportion of employees who left an organization over the past 12 months—are once again climbing at India's top IT firms, adding to the challenges posed by muted revenue growth and a subdued outlook. While HCL Technologies and Wipro saw a modest 20 basis point decline in attrition compared to the previous quarter, the rates increased for the other two by 30-40 basis points. Year-on-year, attrition was up across all four companies, with Infosys recording the sharpest increase. Despite the dip in Q4, Wipro continued to have the highest attrition among the big four. Amid looming macroeconomic uncertainties, TCS has already deferred its annual wage hikes, which were due in April. If other firms follow suit, it could further dampen sentiment among the sector's massive workforce—already grappling with renewed turnover pressures. Read this | Can Infosys weather this storm better than peers? Such moves, if followed by other companies, could also dampen the outlook for the IT industry's sizeable workforce, which had until last year struggled with high attrition rates. India's IT sector is a major driver of white-collar jobs and essential to the country's economic growth. However, the sector—particularly the major players—remains heavily reliant on the Americas, including the US, and Europe. Despite efforts by top firms to reduce dependence on the US, business from the country continues to dominate their portfolios. In addition to the risks posed by tariffs, the sector is also grappling with slow growth in Europe. And the future holds further challenges. Also read | Captive concerns: Why Cognizant has called out the risk from GCCs 'The US, for the first time ever, has a problem of high fiscal deficit, high interest rates, and high core inflation, and is resultantly going into a slowdown/recession, even before considering the tariff impact," Emkay Global noted. While the top IT companies seem to have factored in the potential risks in their guidance, it does not look like FY26 will be a year of revival for the sector.
Economic Times
24-04-2025
- Business
- Economic Times
IT stocks rise as bears cover shorts, with a new outlook
Live Events Agencies (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Mumbai: Information technology (IT) stocks were the biggest gainers in Wednesday's trading, after HCL Technologies ' stronger-than-expected earnings outlook prompted traders to cover some of their bearish bets that were initiated after earnings announcements of its larger peers --TCS and Infosys The Nifty IT index shot up 4.3% - posting its biggest single-day gain in 10 months. HCL surged 7.74%, followed by Coforge Oracle Financial Services Software , LTI Mindtree and MPhasis , which ended 5-6.4% higher. The surge in IT stocks helped the benchmark Nifty close 0.67% higher on Wednesday."What drove up IT stocks today was HCL Tech's FY26 guidance, and because most sector-specific headwinds appeared to be priced in after the recent fall," said Sumit Pokharna, vice president, fundamental Research, Kotak Securities. "Additionally, it was supported by gains in the Nasdaq on Tuesday."The Nasdaq Composite , an index laden with US technology giants, rose 2.7% on Tech's management forecast a 2-5% growth in revenue in FY26, which was better than that of Infosys The Nifty IT index has declined 18.3% this year, as an anticipated slowdown in the US economy due to tariff war is likely to impact the sector's revenues adversely. Top IT firms derive a major chunk of their revenues from the US and Europe. This led to multiple downgrades and price cuts in the sector, resulting in investors shifting to other themes like banks and financials."We're are seeing a rotation of capital from sectors that have already rallied (banks). Investors are attracted to more reasonable IT valuations," said outlook could be prompting some investors to reconsider IT stocks. Apart from cheaper valuations, investors are not betting on a rebound in the sector's prospects Vyas, co-chief investment officer and portfolio manager at Quest Investment Advisors said FY27 may be a better year for the IT sector than FY26.'From FY27 onwards, revenue growth is expected to pick up, supported by an increase in cost optimisation initiatives and vendor consolidation,' he said. 'These trends could lead to greater technology outsourcing by the US enterprises, potentially translating into low-teens earnings growth over the medium term for IT services companies.'Money managers and analysts said the rebound in IT stocks could at best be a trading opportunity. 'The recovery in broader benchmark indices has likely triggered short covering in the IT index, and this momentum could sustain through the April monthly expiry,' said Vyas. 'This offers near-term trading opportunities in the sector.'Chandan Taparia, head of technical and derivatives research at Motilal Oswal Financial Services , said short positions are still intact in IT stocks as it has been the underperforming sector recently and there may be some recovery led by short covering in the coming days as well. Pokharna prefers to be choosy about buying IT stocks at current levels.'Given the recent rally in HCL Tech, we suggest waiting for a more favorable entry point,' he said. 'Our preferred large-cap picks are TCS , Infosys and Tech Mahindra, and Coforge in the mid-cap space.' Vyas suggests investors wait for a dip before buying. 'Over the past four months, valuations in the IT services sector had moderated, aligning more closely with long-term averages,' said Vyas. 'However, the recent sharp rally appears somewhat overdone, and investors may consider waiting for a more attractive entry point, ideally 8–10% below current levels.
