Cognizant - IT mood Dampener

By CNBC-TV18's research analyst, Raja Rajeshwari

IT stocks have been the flavour of the day for the past two days...with each low rupee has been making. While things may be going right on the rupee front, there may be some speed breakers further from business fundamentals.
 
Congnizant whose numbers are closely followed by IT fraternity ...came out with in line numbers. But what tripped was the Q2 guidance. Where expectations were for 8-9%, it has guided for only 5.7% growth. The change of language in FY08 guidance also comes as a surprise. IT had earlier  guided for " alteast 38% growth" which has now been changed to " approximately 38% growth".... Management pointed out further deterioration of US economy in the past 6 weeks and delays among clients. It is highly cautious on the BFSI spending. While it is cautious of single digit growth in this vertical, it expects a slow gradual pick up as clients digest the bear stears event and now focus on higher offshoring. The mgmt is also confident of other verticals and Europe to tide over this slowness.This just reminds of what Infosys and TCS have pointed out post earnings in April,
 
In line with what it had spoken about in Feb and what other IT companies had reiterated, Cognizant expect back ended growth. This is led by ramp ups which are expected to pick up in this quarter. BUT the asking rate is high. If it manages to achieve its 5.7% growth in Q2, then it would have to grow by 10% in Q3, Q4 to just meet its FY08 guidance of 38%.....
 
Any hit from the US economy or less than expected ramp ups would be the biggest risk. While the mood is certainly dampened by Cognizant, rupee will be the only savng grace to keep this IT rally.