Moneycontrol Bureau
Corporate India’s earning and monsoon are key triggers for the market as Nifty defends 8500. Most analysts feel worst for earnings cut is over while technology companies still may announce tepid or negative growth as few have already sounded cautionary notes ahead of results.
According to Nomura, dollar revenue will continue to show marginal or negative jump. It expects April-June quarter to be the sixth consecutive quarter of revenue growth deceleration, with 9.9 percent annual growth from peak of 15.4 percent year-on-year. While Tier-1 IT aggregate organic USD constant currency revenues may grow better at 2.9 percent quarter-on-quarter in Q1 versus 1.9 percent Q-o-Q in last quarter. However, there is some bit of optimism as it feels technology companies' growth will bottom out in Q1 and improve going forward to end at 14 percent year-on-year by Q4FY16.
“After two consecutive quarters of 200 basis points quarter-on-quarter impact on dollar revenue due to cross currency moves, this quarter should see marginal gains (20-40 bps),” it says in a report.
As per Nomura, in constant currency terms, Cognizant (not listed in Indian exchanges) and TCS could lead growth, followed by HCL Tech and Infosys. Wipro and Tech Mahindra may lag with near zero or no sequential growth in constant currency terms.
Tech Mahindra has already issued a warning note that Q1FY16 has some headwinds and tailwinds which could see a risk of marginal decline in both revenue and EBITDA margin a sequential basis. Seasonally weak mobility business will be a drag on Q1 revenues and EBITDA. H1 B visa costs will be another drag on its margins.
Negative sentiment may have been already priced in as two other mid-cap companies Persistent and KPIT Technologies have also issued earnings warnings. Persistent had alerted investors that certain client specific issues could result in dollar revenue decline sequentially.
Nomura sees less chance of positive surprises and would watch out for, “trends in US/BFSI/Retail/ADM/ EAS, which have been laggards, commentary on challenged segments energy and telecom; and continuation of strong momentum in Europe/IMS/BPO/ engineering services/manufacturing/Healthcare.”
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