Will cross currency headwinds impact IT cos' Q4?

Watch the interview of Sandip Agarwal, VP-Wholesale Capital Markets at Edelweiss Financial Services with Reema Tendulkar & Mangalam Maloo on CNBC-TV18, in which he shared his readings and outlook on IT sector. 

Read transcript of the interview

Reema: Recently lot of companies like TCS, KPIT Technolgy, Persistent Systems spoke about cross currency and how it will impact their performance in Q4. Therefore have you lowered your estimates for any of the IT companies for the coming quarter because of the currency headwinds?A: We have not changed estimates based on cross currency for FY15 because Q4 is a residual quarter. So, obviously whatever changes you make to Q4 estimate it automatically changes the full year number. Since we are in middle of the month it is very difficult to predict if there could be some one off event or something which may happen. So, after March 25 we can have fair idea of what kind of growth can come. However going by what is happening right now, this quarter also around 2-2.5 percent impact will be there due to cross currency for the largecap companies. It can vary from 1.5-3 percent depending on the exposure.

Reema: On the whole you like the IT sector but there has been a sharp divergence in their stock performance in 2015. For instance an HCL Tech has rallied about 30 percent, TCS is flat in 2015 while Infosys is somewhere in the middle. Will these kind of stock moves continue, do you think HCL Tech will continue to outperform and TCS will continue to lag?A: HCL Tech has been growing very aggressively. Their order book in infrastructure management services (IMS) was like 2-3 years and now they are getting benefit out of it. They have been having a first mover kind of advantage in Europe and in geographies where most of the IMS deals came for rebid and they have been present and invested in those geographies and benefited the most.Wipro which was one of the best IMS player in the market they probably were into the African and emerging markets where things did not pickup that much. So, they did not benefit out of it in spite of being kind of market leaders at that point of time.Similarly TCS with very strong sales team and very strong execution capabilities have also benefited from the IMS outsource increasing which has happened in last two years.