Despite solid demand forecasts from IT service providers, the weakening global macroeconomic environment increases fears of a downturn. For the IT industry, this could mean fewer client spending, putting a strain on their demand pipeline beyond fiscal 2013.
“Warnings of profit from customers of IT businesses and the projection of 6-8 percent global IT spend growth on heightened external risks are unfounded,” say analysts at Kotak Institutional Equities. In global IT, we soften our attitude and normalise.” Let’s get baking. Increase spending by 3-4 percent in fiscal year 2023E and 7% in fiscal year 2022E.”
As a result, revenue projections for IT equities covered by the brokerage house have been cut by 2-10% for FY2023-FY2025E.
According to Kotak analysts, the IT sector’s growth over the previous two years has been broad-based and driven by a shortage of consumer spend and vendor capacity, according to a June 14 report. A tighter monetary policy environment, on the other hand, would mean that the low-hanging fruit’s easy growth or gains would vanish. It stated, “Indeed, growth will be considerably more polarised.”
Another concern for IT firms is the significant devaluation of various worldwide currencies against the US dollar in the second quarter.
“On a sequential basis, cross-currency headwinds vary from 70 to 190 percent. Our revised revenue growth expectations reflect for strong cross-currency headwinds, resulting in a larger reduction in US sales growth projections than previously anticipated. Kotak added to the report, “Moves while the constant change currency level is low.”
Several Indian IT stocks have lately been downgraded by global brokerage houses Nomura Inc and JP Morgan, according to investors. He noted concerns that companies may curtail IT spending in the face of global economic instability and central bank interest rate hikes as a danger to his earnings growth estimates.
“On a sequential basis, cross-currency headwinds range from 70 to 190 percent.” Our revised income growth forecasts account for stronger cross-currency headwinds, resulting in a bigger reduction in US income growth estimates compared to prior estimates, although changes on the fixed foreign money stage are reduced,” according to the Kotak study.
Traders believe that foreign brokerage houses Nomura Inc and JP Morgan have recently downgraded a number of Indian IT stocks. They identified risks to their earnings growth forecasts, such as companies cutting IT spending in the face of global financial instability and central banks raising interest rates.
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