IT Sector Update

Q4FY11E expectations

·    Muted Topline: Q4 seasonality & new project commencements from Feb’11 to impact vol. growth (expect ~3-4% QoQ growth) with a stable pricing resulting in rev growth of ~4-5% QoQ (in INR terms).

·    Mixed EBITDA: Ex. Wipro, margins would be impacted by ~40- 60 bps QoQ due to lower utilisation & company specific events (higher S&M costs for TCS/ Tsunami in Japan for HCL Tech etc.)

·    Lower PAT: Lower forex gain vs. Q3FY11 to impact PAT performance

·    Other factors: BFSI & Retail among verticals lead the growth whereas ES/C* & IMS# continue to drive growth among services

Other operating trends to watch: Management direction on CY11E IT spend, visibility on discretionary spend, FY12E gross hires, wage inflation and supply challenges

Best Bets: TCS and Infosys remain BEST BETS driven by high growth in core BFSI vertical, market share gains in large deals/ client mining, pricing power from increase in Enterprise Solutions revenues, power focus on non-linear revenues and better placed to manage supply challenges.

11th April,2011

The markets opened on a positive note amidst mixed global cues and soon slipped into the red in the morning session. The markets however managed to trade near the previous close till the afternoon session but gradually moved lower throughout the day and ended on a weak note. Among the Sectoral indices Realty & Auto was the major losers while FMCG ended with minor gains. Among the Sensex stocks Bharti Airtel (1.56%) and ITC (0.88%) were the gainers while Jaiprakash Asso. (3.77%), DLF (3.73%) and Hindalco (2.99%) were amongst the losers. The Sensex lost 140 points or 0.71% to close at 19,451 while Nifty lost 44 points or 0.74% to close at 5,842.

Total traded turnover stood at Rs 1,08,894 cr. In equities FIIs were net buyers (Rs 385 cr) while DIIs were net sellers (Rs 128 cr).On the derivatives side, FIIs were net sellers in Index Futures (Rs 788 cr) and Stock Futures (Rs 561 cr) while they were net buyers in Index Options (Rs 1231 cr) and Stock Options (Rs 2 cr).

The US markets ended lower as stocks corrected on renewed concerns that rising crude prices will adversely affect global economic growth. The Dow Jones lost 29 points or 0.24% to close at 12,380 while NASDAQ lost 16 points or 0.56% to close at 2,780.

The Asian markets are trading mixed. Nikkei is trading lower by 0.33% while Hang Seng is currently trading marginally higher by 0.13%.

The markets ended on a soft note after a subdued trading session amidst concerns that rising crude prices, high inflation and rising interest rate may impact corporate earnings. The Industrial output data for the month of Feb’11 due by afternoon today. The markets may open on a soft note tracking mixed global cues.

The trend deciding level for the day is 5865, If NIFTY trades above this level then we may witness a further rally up to 5905‐5940‐5968 levels. However, if NIFTY spot trades below 5865 levels then we may see some profit booking to initiate in market, it may correct up to 5820‐5790‐5765.