PINC Result Preview – IT Services

Indian IT vendors have demonstrated robust strength since the past two quarters, driven by uptick in discretionary spend and pent-up demand. We expect them to report lower volume growth than in Q2FY11 as Q3 is considered a seasonally weak quarter with lower working days. Better clarity on the demand environment would emerge after budgets are finalized by clients early next year.

MACRO ENVIRONMENT

* Accenture's strong revenue growth in outsourcing signals a positive trigger for Indian IT vendors.
* Robust growth in Oracle's license sales indicates higher discretionary IT spend.
* Increased expectations of US GDP growth will further drive the global economic environment and raise demand for IT services.
* Presence of Indian IT vendors is growing in industry-wide IT contracts, according to TPI.

Q3FY11 EXPECTATIONS

* Muted volume growth as compared to Q2FY11
* Stable pricing
* Cross currency impact – A mixed bag
* No positive trigger for margins
* Clients' perspectives for FY12

Source : Equity Bulls

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