Software & Services share price target

The Q3FY24 earnings from the big four IT firms — Tata Consultancy Services (TCS), Infosys, HCL Technologies (HCL Tech) and Wipro — mirror a global slowdown in IT spending. This trend comes as a surprise to no one, since Indian IT companies have been flagging that risk over the last couple of quarters.

Our picks from large caps: HCL Tech, LTIMindtree Our picks from Mid Caps: Coforge, Persistent Systems, and Cyient.

Top Sector Ideas - IT Services

The big four IT firms—Tata Consultancy Services (TCS), Infosys, HCL Technologies (HCL Tech) and Wipro—posted predictably subdued results in Q2FY24. The trend reflects the persistent unfavourable market conditions over the past few quarters. Cutbacks in discretionary spending, project ramp-downs, and decision-making delays have left these IT powerhouses and once-darlings of the stock market facing a challenging landscape.

The Indian IT sector is expected to deliver modest results at best, in the traditionally strong July-September quarter. As macroeconomic conditions have stayed largely unchanged over the past few months, the sector is seeing cuts in discretionary spending, and delays in deal conversions.

Sector Update: Accenture IT Services

We surveyed 220 restaurants across 40 cities and towns pan-India between 25th Aug’23 – 10th Sept’ 23, to assess various parameters such as take rates charged by food aggregators, restaurant level AOVs, propensity of restaurant partners to advertise on the food aggregator platforms, ad-spend effectiveness for restaurants and usage of Hyperpure (Zomato’s B2B e-commerce offering) by restaurants.

We have analysed the just-concluded quarter results of global SaaS companies with whom Indian IT players have ‘sell-to’ and ‘sell-with’ partnerships and digital engineering companies, which can be considered as a proxy for high-end digital services demand.

1) Retail sales growth was largely resilient as reflected in higher than expected growth for Home Depot and Walmart in the Jun’23 quarter. Walmart has also increased sales and operating income guidance for CY23. 2) Discretionary retail continues to be under pressure. 3) Some retailers have highlighted their ongoing technology investments for improving customer and employee experience across physical and digital channels, speeding up online deliveries and exploring AI and large language models for predictive analytics.