As the rupee traded below the 61 mark against the dollar, the IT majors rallied 1-2% in the early trading hours and touched record highs before tapering off at the close.
While Wipro ended at Rs 617.85 with moderate gains of 0.4%, both Infosys and HCL Tech declined by close to 0.5% to Rs 3,830.3 and Rs 1,731.35, respectively. TCS retraced its early gains to lose as much as 1.5% and closed the session at Rs 2,733.20. Analysts expect IT services majors to deliver stellar earnings in a seasonally strong September quarter despite adverse cross-currency movement on the back of a strengthening US dollar. While TCS is once again expected to outdo its peers in sequential dollar-revenue growth, experts keenly await an indication from Infosys on the strategic path it aims to take under its new CEO, Vishal Sikka.
According to Barclays Capital, an improvement in the demand environment, stable US macro and an increase in project award estimations by consultants all hint towards strong volume growth for IT service providers during the quarter. However, the brokerage notes that ...cross-currency fluctuations ($ appreciation) are expected to impact $ revenue growth in Q2FY15 by some 60-70 bps.
Various estimates see TCS reporting 4.5-5% organic sequential dollar-revenue growth for the quarter. While the cross-currency moves are seen impacting the dollar revenues by 60-90 bps, including the contribution of a JV with Japan's Mistubishi, the IT giant is seen reporting more than 7% q-o-q topline growth in dollar terms.
Both HCL Tech and Wirpo are seen meeting the Street expectations of q-o-q revenue growth that ranges from 2-3%. While most experts see Infosys retaining its FY15 revenue outlook of 7-9% y-o-y, they believe the actual growth may remain towards the lower end of the range.
Deutsche Bank, which expects Infosys to announce a 2.1% sequential dollar-revenue growth in the September quarter, believes that the IT major may make a downward revision to its FY15 guidance to 6.5-7.5% y-o-y growth due to the strength in US dollar against all major billing currencies.
To meet the lowered guidance, Infosys has to deliver 1.8-3.1% CQGR over the remaining quarters of FY15E, added the brokerage in a preview report.