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Informist, Friday, Jul 19, 2024

MUMBAI – Extending gains for the sixth straight week, shares of information technology companies are seen higher next week, supported by better-than-expected June quarter earnings. As the Budget is expected to drive the markets next week, investors will also likely place their bets on IT stocks, according to analysts. There will be stock-specific action in Wipro, which announced Apr-Jun earnings after market hours today. 

Wipro reported a better-than-expected consolidated net profit for the June quarter. However, the revenue failed to meet the Street's expectations. The IT major's bottomline rose nearly 6% sequentially to 30.03 bln rupees, above analysts' estimate of 29.63 bln rupees. The revenue declined more than 1% on quarter to 219.64 bln rupees, below analysts' estimate of 222.09 bln rupees.

The benchmark indices corrected today as investors booked profits ahead of the full Budget on Tuesday. Despite the overall market correction, sectors like IT still remain stable, buoyed by strong earnings, Anshul Jain, head of research at Lakshmishree Investment and Securities, said. Investors are advised to monitor support and resistance levels closely and consider defensive plays in the IT sector to navigate the current market volatility, Jain said.

Shares of Infosys rose to an over two-year high today after the company raised its revenue growth guidance to 3-4% in constant currency terms for the current financial year. Analysts had expected the company to retain its guidance of 1-3%. The company's consolidated net profit and revenue also came in slightly better than the Street's expectation. 

Brokerages were bullish on the stock, with Jefferies and Nomura Global Market Research maintaining their "buy" rating, as per a CNBC-TV18 report. The revenue guidance given by the company seems conservative in the context of strong deal wins, Jefferies said in a report. Initial signs of a recovery in banking, financial services, and insurance, strong deal wins, and an all-around improvement in operating performance suggest the worst is behind for the company, Jefferies said.

Shares of Persistent Systems ended 6.4% lower today after the company reported a 2.8% quarter-on-quarter fall in its consolidated net profit for the June quarter to 3.06 bln rupees. The net sales of the company rose 5.7% sequentially to 27.37 bln rupees. While the company's topline managed to beat analysts' estimates, the bottomline was in line with the projections. 

Persistent Systems faced several headwinds during the quarter such as higher visa costs, wage hikes, and investment costs. As per the company's management, there was a 60 basis point impact on account of one-time visa costs and a 210 bps impact on an increase in subcontractor costs to support downside ramp-up in key accounts. 

Nirmal Bang Institutional Equities said today that it has been optimistic about the IT sector since the start of 2024-25 (Apr-Mar) and believes that bottoming out of macro uncertainty to unleash broad-based growth in the financial year followed by strong momentum from 2025-26. Early green shoots from banking and financial services clients in the US and positive growth in technology budgets by large US banks underscores the argument, the brokerage said.

"We believe the ramps-up would be faster in FY25 (2024-25) as enterprises are focused on automation and efficiency programmes. With faster deal translation into revenue, sustainability in growth will resume and indicates an improving macro scenario," Nirmal Bang wrote in its report. 

Although the discretionary demand remains weak, improved sentiment in the US from BFSI clients with higher tech budgets will support demand, the brokerage said. Even though clients are in discussion with businesses around artificial intelligence programs, conversion of these conversations into deals/revenues is still unclear, it said.

"Although the overall demand environment remains the same we believe any rate cut by the Fed could probably propel short-term deal wins and faster ramp-ups of earlier deal wins," Nirmal Bang added.

TOP HEADLINES

* Earnings Review: Persistent Systems consol PAT dn 3% QoQ, meets view
* L&T Tech sanguine about fall in Apr-Jun margin, retains FY25 guidance
* Infosys ADRs hit over 2-yr high after co ups FY25 revenue guidance
* Tech Mahindra to merge its subsidiaries in Philippines
* Tanla Platforms Apr-Jun consol PAT rises 8.4% QoQ,  sales fall 0.3%
* Earnings Review: Infosys raises FY25 revenue guidance, to up hiring
* Earnings Review: L&T Tech misses Street estimates, sales, PAT dn QoQ
* Byju's parent co moves NCLAT against insolvency admission order
* Persistent Systems to give $50 mln corporate guarantee for US arm
* L&T Tech Apr-Jun consol PAT falls 8% QoQ as sales fall 3%
* Tata Tech Apr-Jun consol net profit rises 3% QoQ, revenue falls 2.5%
* Persistent Systems Apr-Jun consol PAT falls 3% QoQ to 3.06 bln rupees
* Infosys raises FY25 revenue growth guidance, retains margin view
* LTIMindtree says Absa Bank extends multi-mln-dollar contract
* Earnings Outlook: Wipro topline seen flat QoQ on low client spend
* Earnings Outlook: L&T revenue, PAT seen subdued in a tough quarter
* Earnings Outlook: Mfg, hi-tech ops to drive Tech Mahindra growth QoQ
* Mastek Apr-Jun consol PAT falls 22.3% QoQ to 715 mln rupees
* Karnataka halts reservation bill for locals in pvt jobs amid backlash
* Zensar Tech arm to buy US-based BridgeView for $25 mln
* Earnings Review: LTIMindtree sees BFSI momentum continuing in Jul-Sep
* LTIMindtree Apr-Jun sales up 3% on quarter, beat Street estimates
* Earnings Outlook: Visa costs, HR usage may drag Coforge consol PAT dn
* Just Dial Apr-Jun PAT rises 69.3% YoY to 1.41 bln rupees
* Wipro to infuse additional 1.44 mln rupees in Huoban Energy
* NCLT admits BCCI's insolvency plea against BYJU's parent co
* Happiest Minds unveils AI-powered IT infra management package
* Earnings Outlook: Weakness in verticals may hit L&T Tech's topline
* Earnings Outlook: Persistent Systems' net profit seen 3.3% lower QoQ
* Earnings Review: HCL Tech tops Apr-Jun profit view; retains guidance
* HCL Tech keeps FY25 revenue guidance unch, Apr-Jun sales dn 1.6% QoQ
* Zomato's Slovakian step-down subsidiary dissolved effective today

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Noel John

Edited by Saji George Titus

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