With the second quarter results for the July to September up ahead the earnings season is set to gain momentum with figures being declared from the technology major Infosys this Wednesday. The IT companies had a very bad opening in the 1st quarter with wage hikes and uncertain business environment. As the rupee has depreciated drastically it is set to provide a relief to the technology companies; however the Forex gains are set to be limited.
Looking at the sector in the future looks hazy too with the continuing economic problems. There are analysts who believe that the companies may start cutting in their IT expenditure because of the sluggish economy that is expected hurt the earnings of the IT companies in the coming quarters. This quarter the earnings are expected to grow by 5-8% on an average for the companies in the concerned sector.
The estimation has proved that for each 1% depreciation in the Rupee reflects in positive impact for the IT companies with an increase of 30 to 40 bps in their earnings. The heavy weights of the sector such as TCS, Infosys would certainly reflect the depreciation in Rupee in their increased earnings. But some other companies such as HCL technologies or Wipro might show a decline of 250 to 150 bps decline due to the wage hikes of their employees.
Bell the Bull says: Good numbers this quarter could help the markets to rally few more points among the uncertain conditions.