Reliance Money negative on IT sector

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Reliance Money believes that there is more pain still left to be seen in the Indian IT sector and continues to remain negative on the sector.

Sector Outlook:-

With deteriorating industry macro data coupled with uncertainties looming over the global economic environment, we believe it is fair to assume a more difficult time ahead for the Indian IT sector. Most of the Indian IT companies are indicating at a more cautious environment with key sector headwinds continue to make strong headlines like delays in deal cycle time, probable squeeze in IT budget for CY09 , pricing cut requests, slower volume growth , volatile currencies movements etc.

We believe, although there was a steep correction witnessed in the Indian IT companies and valuation seems to be attractive at current levels, we are still not comfortable with the Industry fundamentals and continue to remain worried about the sector headwinds. As far Q3FY09 performance is concerned, we believe numbers will be inline with the expectations,

However cross currencies movement continues to impact the USD based performance, with depreciating rupee continuing to aid the performance in INR term. However, the main issues which are going to remain in the main focus for Q3FY09, is budget for CY09 and client specific issues and pricing. We believe there is more pain still left to be seen in the sector and we continue to remain negative on the Indian IT sector. Effect of currency fluctuation likely to

Recommendations:-

• Sell- KPIT Cummins .
• Buy- Glodyne .
• Hold- Infosys , Satyam , Tech Mahindra , Zylog System .
• Reduce- TCS , Wipro , HCL Tech .

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