Investors are expecting a soft quarter from IT companies due to the seasonality factor caused by furloughs and year-end holidays. The Street’s eye will be glued to the commentary on demand that the software majors offer and any potential tweak to the growth guidance.
“While we believe near-term revenue growth outlook (FY23F) for the sector remains strong, uncertainties have increased significantly for the FY24F growth outlook. We still see downside risks to the consensus revenue growth forecasts for FY24,” Nomura Financial Advisory .
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JP Morgan said mean reversion in growth-driven earnings misses should deflate and reset valuations. “While Q3 growth is likely to be blamed on furloughs, we believe weak Q4 growth and poor CY23/24 guides over Feb-May should drive a sharp expectation reset over the next 6 months and set in motion P/E contract to pre-Covid averages (30-40% lower,” JP Morgan analysts Ankur Rudra and Bhavik Mehta said. They expect revenue growth of Indian IT services to reset from mid-teens to mid to high single digits from tight tech budgets and pricing pressure. Kotak Institutional Equities expects Kotak to report a relatively better quarter while HDFC Bank’s net interest income (NII) growth is seen at ~20% YoY, led by loan growth of ~20 % YoY due to strong growth in retail but slower in the corporate segment. “We expect NIM to show a marginal improvement but lower than peers given the structure of the loan book,” it said.
Here’s the earnings calendar for the week:
January 12 Infosys, HCL Tech, , and GM Breweries
January 13 Wipro
January 14 HDFC Bank