NASSCOM cuts constant currency growth guidance to 8-10% for FY17

Information technology industry body NASSCOM today cut growth guidance for the industry to 8-10 percent in constant currency terms from 10-12 percent. CNBC-TV18 had first reported the possibility of such a cut on November 4.

However, there is some relief as NASSCOM expects only deferral of IT deals and not any major cancellations. It also notes that headcount growth for the industry continues and attrition remains low.

Commenting on the revised growth rates, Ravi Menon, IT Analyst at Elara Capital told CNBC-TV18 while there are some headwinds, there are some positive signs as well for the industry. Pointing to the oncoming US Federal Reserve meet, he said a rate hike is becoming more of a certainty and that should drive demand for the companies.

Menon also shared his take on Infosys stock. He believes most negatives are already in the stock price and it would now be a good time to enter the stock if required.Below is the transcript of Ravi Menon’s interview to Sonia Shenoy and Anuj Singhal on CNBC-TV18.Sonia: We saw this coming right, so it does not come as a fresh negative surprise, the cutting of NASSCOM’s guidance?A: That is right. People were expecting this. The only question was whether the currencies would actually rebound and since the rebound has not done that much, this was really coming. Not really unanticipated, I would say.Anuj: So, would you say most of the bad news is getting built into the price for these stocks or do you see one more round of selling?A: I definitely think so. There are some positive signs as well here. There is talk of the Fed rate hike now becoming more of a certainty as what it was at 70 percent probability that some experts put it some time back. So that should help the US banking sector and that should drive some demand up. And there is also talk of less regulation in the US for the banking sector. And IT dollars have been redirected at compliance and so hopefully we should get to see some of that get back to IT.Sonia: I wanted your thoughts on Infosys because it is now trading closer to its trough valuations, trading at somewhere around 14 times FY18 earnings. Is this is a good time to be buying into the stock or do you think that one could better levels in the months to come?A: No, I do not think so. Now that this quarter is probably going to be a little weak, but the next quarter, if that is fairly strong and then then the guidance after that, that is what people will be watching for. So, it would still probably be a really good time to enter. And then in between, in between we will see some rupee depreciation. We could actually see the stocks moving up quite a bit. So, that is another possibility. And he Fed rate hike is supposed to happen towards end of December. So, this is really the best time to enter the stock.