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Obama is not bad news for your IT stocks

Published on Wed, Nov 05, 2008 at 10:20 | Source : CNBC-TV18

Updated at Thu, Nov 06, 2008 at 11:17

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Nifty

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Democrat Senator Barack Obama was elected as the first African-American President of the United States today in a historic victory over Republican Senator John McCain. A McCain victory may have been preferred by India Inc, as compared to the outsourcing backlash from Obama in the run up to the US elections. Ironically, post the Obama win, experts feel there will be no negative impact on Indian IT outsourcing. In fact, they are optimistic and don't see any immigration tightening measures and anti-outsourcing legislation.

The Finance Minister P Chidambaram has welcomed Obama's election as US President. He said that Obama's comments on outsourcing would not affect Indo-US economic ties. "I am confident that the US India relations will only strengthen in the future, a comment about outsourcing etc shouldn't bother us. Once he is in office, he will realise that in this interconnected world, countries have to work together and the US is the world's largest economy and India is the world's largest free-market democracy have to work together and I think we will gain by the new administration."

"I cannot speak for the government but I can speak as an individual, and as an individual I think this election is a transformational change in the United States. Many ghosts in the US have been exorcised by this election. It is a tribute to the US Democracy that a young, forward looking change agent, a black American has been elected."

Ganesh Natrajan, Chairman, Nasscom, feels Obama would do nothing that would disturb the success of these companies and come in the way of current outsourcing. He does not see substantial or sharp cuts in the IT budgets.

TV Mohandas Pai, Director and Head Admin, Infosys, said, "It could mean slightly more restrictions in visas - they already have comparable wages and that could be tightened up. It could mean little less flexibility but on the whole it will be marginal."

Girish Paranjpe, President of Wipro, said there should be no worries as long as the US government is pro-business, and that creating jobs in the US may not mean minimising outsourced jobs.

Venugopal Dhoot, CMD, Videocon, feels Obama victory will be good for Indian IT sector.

Phaneesh Murthy, CEO of iGate, said that he does not see any concern from the President's side at least for now.

However, in an outright contrast to industry experts views, market analyst Dipan Mehta continues to fear an IT sector downtrend. Senator, Barack Obama had been expressly against outsourcing during the election campaign.

Dipan Mehta, Member BSE and NSE said, "IT is one sector that is facing the maximum challenges at this point in time." He advices investors to be slightly underweight in that segment and buy the stock only when they are at extremely attractive.

Impact on IT space and exports:

Speaking on Barack Obama's win, Ganesh Natrajan said that he does not expect Obama's victory to affect the current constituents working in the IT space and does not see substantial or sharp cuts in the IT budgets. He feels the IT sector is very integral to the county's competitiveness.

Natarajan is positive that nothing negative would happen to the outsourcing industry. He added that he sees a 20% export growth for FY09.

Natarajan further said that one should not worry about immigration tightening and anti-outsourcing legislation. Rupee is expected to stabilise in the 42-45 per dollar range, Natarajan said. "America will charter a new course for itself in history which will give opportunities for all of us in India."

"There are many challenges in front of Obama with regards to reviving the economic decline in the US."

Natrajan believes that the IT and business services segments in India are integral to the value chain of most American and European customers and feels it is highly unlikely that any tax or any other prohibitive measure would be taken.

Girish Paranjpe, President of Wipro, said that the Obama win may be a blessing in disguise for Indian IT industry. He said that the fears of protectionism hitting outsourcing may be overblown.

"Barack Obama's on his policy on globalization very categorically said that he thinks globalisation is irreversible and it is futile to turn back the clock and it's the best thing to embrace the future. He has been very open about opening up the visa regime and improving the way two-way trade happens. He has been in favour of multilateral trade rather than one to one country trades. So given all these things, I think there is more anxiety than reality behind some of the feelings."

Paranjpe sees reduction in capital expenditures and consumer spending and said that it would take a couple of quarters to work its way back. He sees be pain in the next few quarters, which will be distributed all over the world. He feels budgets will be under pressure over the next six months and that given the situation, more negotiations from clients is expected.

"I think people are reading too much into the elections. As long as we have a healthy business and a pro-business government I do not think we should worry too much."

Commenting on the same Venugoal Dhoot of Videocon said the promotion of IT industries in the US would continue. He believes Obama would be useful for Indian ventures in USA especially, the global stabilization. "This is a very good time for India."

Phaneesh Murthy, CEO of iGate, said he does not see any concern from the US President's side at least for now. "President Obama's talk has shifted during the past two-three months as he has stopped talking about entire outsourcing and started talking a lot more about trying to create those kinds of jobs in the United States which cannot be outsourced."

Murthy believes North America will continue to be the largest dominant market, even for Indian IT industry's growth in 2009. "About 65% of the Indian industry still comes from North America. It is the market which responds most quickly to pressures and to innovative solutions, and it is the market which rewards its people for taking risk. It is paying off."

Impact on employment in India:

Dhoot said the Democrat win would not curtail Indian employment as the US requires Indian brains. He hopes Obama would control recession with the methods he described in the election campaign.

Paranjpe said there should be no worries as long as the US government is pro-business and that creating jobs in the US may not mean minimising outsourced jobs.

Natrajan feels that Barack Obama has a great chance to make difference and that difference be positive. He said that the President-elect would focus on job creation in America which does not necessarily mean minimizing of outsource jobs.