December quarter earnings are set to gain steam with large-cap companies beginning to report their results today onwards.
Kick-starting the earnings season are IT majors – Infosys, TCS, and Wipro – that will release their report cards later today.
The third quarter is usually a low season for the IT services industry in India due to furloughs in its majority markets — the US and Europe.
But analysts expect the third quarter of FY22 to be an exception this time, owing to demand for high digital transformation expenditure and a greater discretionary spend.
Though the increased cost of hiring, rising salaries and lower working-days may affect margins, many analysts say a falling rupee in relation to the dollar can help.
Overall, the Street is expecting the revenue of top-tier companies to grow 2.5-6%, with Infosys leading the chart in organic growth.
According to global brokerage Jefferies, Infosys’ growth could be impacted by seasonal softness, although deal ramp-ups should help drive 3.7% quarter-on-quarter revenue growth in constant currency.
Overall, the rupee revenue may rise up to 19% YoY and 4.5% QoQ to Rs 30,926 crore. The net profit, meanwhile, may grow up to 10% YoY and 5.4% QoQ to Rs 5,713 crore.
As regards TCS, the Tata Group crown jewel may register over 16% yearly rise in rupee revenue at Rs 48,822 crore, while the net profit could swell over 14% YoY at Rs 10,126 crore. Ebit margin is expected to stay above 25%.
Wipro, meanwhile, could report rupee revenue growth in the range of Rs 20,300 cr to Rs 20,368 crore. Like peers, its EBIT margin is likely to take a hit due to salary hikes and may fall around 400 basis points YoY.
That said, with large deals becoming fewer, and consulting revenue growing faster than outsourcing revenue, the Street will watch for what the firms say on the demand outlook.
Earnings of nine other small-cap companies, stock-specific news flow, retail inflation and IIP data, and investors’ assessment of the Covid-19 situation will drive the markets today.
Yesterday, equity markets ended higher for the third straight day amid hopes that India Inc will post robust earnings for the December quarter.
The BSE Sensex ended 221 points higher at 60,617-level while the Nifty50 settled at 18,056, up 52 points.
In 3 days, both the benchmarks are up 1.4% each.
One of the most active stocks on the bourses yesterday, was that of Vodafone Idea. The shares bucked the firm market trend and plunged 21% after the company decided to convert interest on deferred spectrum and adjusted gross revenue dues into equity at par value of Rs 10 per share.
With this, the government is set to become the largest shareholder of Vodafone Idea, holding around 35.8% of the total outstanding shares of the company.
According to analysts at Ambit Securities, the event won’t change the VIL’s competitiveness as the government has made it clear that it won’t infuse funds in the company.
Nonetheless, the stock still looks firm on charts as yesterday’s sharp intra-day fall failed to dismantle the bullish bias.
According to technical charts, the stock has consistently seen heavy volumes above the breakout level of Rs 14. Volumes will further increase above the next hurdle of Rs 17.
When this happens, the momentum may see the stock rally towards Rs 21 and Rs 23, which is a 35% upside from current levels.