India Insight

Analysts remain positive on India’s IT stocks after 2013 rally

India’s information technology services businesses will continue to benefit from improving client demand from developed countries in 2014, pushing stocks higher after a stellar performance last year, analysts told India Insight.

India’s No. 1 IT services exporter Tata Consultancy Services (TCS) and its rival Infosys beat analysts’ expectations in their financial results that were released earlier this month. They also raised their sales growth forecasts on signs of improving economies in the United States and Europe.

“In Europe we are gaining market share; in U.S. things are looking up – that will drive discretionary and new technology spends,” said Kuldeep Koul, IT-sector analyst at ICICI Securities. “What’s also helping the industry … is the fact that the rupee continues to remain at very benign levels.”

Global IT spending worldwide is expected to rise more than 5 percent this year, according to research firm International Data Corporation, while Gartner expects spending to grow 3.1 percent to $3.8 trillion.

The BSE IT index rose nearly 60 percent in 2013 on signs of a global economic recovery and a weak rupee which helped boost earnings. Stocks such as TCS rose 73 percent while Infosys rose 50 percent.

Markets this week: Coal India, ITC top Sensex losers

The BSE Sensex lost 3 percent in the week ending Aug. 2, extending its losses from the previous week and marking its biggest weekly fall since mid-March.

Markets remained on the edge on uncertainty over how long the Reserve Bank of India (RBI) would continue measures to defend the rupee. The rupee fell 3.4 percent over the last five trading sessions and ended at a record closing low on Friday.

The central bank left the repo rate and cash reserve ratio unchanged at its policy review on July 30, but said it will roll back recent liquidity tightening measures when stability returns to the currency market.

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