IT firms may post decent Q2 growth driven by weak rupee

Information technology firms are expected to post revenue growth in the range of 5-9 per cent in the second quarter this fiscal on account of weakness in rupee against the dollar, analysts say.

"The top line of frontline IT companies is expected to grow in the range of 5.6-9.3 per cent quarter-on-quarter in the second quarter this fiscal driven by depreciation of the rupee against the US dollar, which is likely to boost the top line growth by 4-4.5 per cent on a sequential basis," said Sharekhan, a domestic brokerage firm, in its IT earnings preview report.

IT major Infosys would kickstart the quarterly earnings season from October 10, followed by HCL Technologies which would come out with its corporate results on October 15 and Satyam Computer Services on October 17.

The rupee has sequentially declined against the dollar in the Q2, 2008, which is likely to benefit some of the frontline IT stocks like Satyam and Infosys, which had hedged their positions at the lower end of Q1, 2008, the report stated.

On the other hand, Wipro and HCL Technologies had higher hedge position, while in case of TCS, the forex losses would be limited on account of higher portion of options in its hedge position, it added.

Rupee has been sliding against the dollar since April and at present has an exchange rate of about Rs 47 against a dollar. On September 30, rupee stood at 46.47 against the greenback compared with 42.92 on June 30. On a quarterly basis, the rupee has fallen nearly 8.27 per cent.

The present rupee level is, however, well above the mark at which the research firms have predicted for the current fiscal, even as pricing pressure continues.

Another firm Motilal Oswal said in its IT earnings preview report that the revenue growth of the firms would be driven by 3 per cent volumes growth, amidst flat pricing.