IT Sector: Currency tailwinds set to boost Q2 earnings

Nachiket Kelkar
Moneycontrol.com

The second quarter (July-September) earnings season will gather momentum shortly as technology major Infosys unveils its numbers on Wednesday. IT companies had a disappointing first quarter, as wage hikes and an uncertain business environment in the US and Eurozone chipped away at the operating margins. A depreciating rupee could provide some relief to these companies now, but forex gains will be limited and could even lead to mark-to-market (MTM) losses due to currency hedges taken by several companies.  

The outlook for the sector also remains hazy given the continuing economic problems in both the US and large tracts of Eurozone. Many analysts expect clients in these regions to cut their IT budgets because of the sluggish economy, which in turn will hurt earnings of Indian software service providers in the coming quarters.

For the second quarter, IT companies