This week is likely to be exciting for investors in Indian Information Technology (IT) stocks. Large-cap Infosys Ltd., Tata Consultancy Services Ltd. and Wipro Ltd.’s December quarter earnings are set for January 12.
Ahead of the Tier-I technical results, ISG – the global consultant for the IT services sector – has said that it maintains strong demand momentum in 2022. Analysts say this augurs well for the Indian technology sector.
In its Q4CY21 call, ISG management said that contrary to its expectations of a sequential decline, growth was flat on a quarter-on-quarter (qoq) basis, however, it grew 30% year-on-year (YoY) . As far as deals are concerned, ISG’s Annual Contract Value (ACV) hit an all-time high in 2021, yet it expects to see 14% year-on-year in 2022 supported by ACV legacy and cloud deals. The year will grow.
This is a good sign for Indian IT companies.
Analysts at Motilal Oswal Financial Services Ltd view the strong double digit growth outlook for FY 2022/FY23 from ISG as positive. In a January 11 report, the domestic brokerage house said that this supports our view that demand momentum should continue to support growth in IT services despite a higher base. “More importantly, growth is broad-based in both 4QCY21 as well as 2022E,” the report said. We expect strong opening comments from Indian IT services companies for FY23 over the duration of the 3Q results season. Huh.”
On the flipside, ISG gets some respite from the ongoing pain highs of the sector. ISG expects the problem of increase in staff strength to continue for the next two-three quarters.
Nomura Financial Advisory & Securities (India) Pvt. Ltd. said in a report. The research house expects our coverage of IT services companies in India to grow at around 1.5 times of pre-COVID levels during CY22-24.
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