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Mint
2 days ago
- Business
- Mint
Infosys, HCL Tech to TCS share prices: Is IT sector poised for a better H2CY25
Stock Market Today: HCL Technologies, Tata Consultancy Services, and Infosys share prices, among other IT stocks, have underperformed during the first half of the calendar year, led by concerns about the global economic growth. The proposed tariffs further added to the uncertainties, especially in developed markets such as the US and Europe. Not surprisingly, HCL Technologies, Tata Consultancy Services, and Infosys share prices have declined 10-17% during the year (year-to-date in 2025) despite the benchmark Nifty 50 Index having risen 7-8% in the calendar year to date. With expected rate cuts in the US, expected to aid economic recovery, the progress in trade deals is being watched carefully. Can the IT sector experience recovery in the second half? The sector faces challenges from global economic uncertainties, including potential US trade tariffs and macroeconomic headwinds in major markets such as the US and Europe. These factors are expected to weigh on growth prospects and may lead to a cautious approach in client spending, said Ajit Banerjee, President and Chief Investment Officer, Shriram Life Insurance. The Indian IT sector is poised for moderate growth in Q1 FY26. The performance will be influenced by global economic conditions and client spending behaviors, added Banerjee. Kotak Institutional Equities also believes that the quarter will be a mixed one, with mid-tier IT services companies reporting strong growth, while large IT companies and ERD names will disappoint. The operating performance and deal wins will be watched. Deal wins will be strong, although not necessarily net new for the industry, as per Kotak Institutional Equities. They also expect EBIT margins to be stable. Discretionary demand continues to be weak; however, few clients are proactive and want to be leaders in their sectors in terms of technology, said Banerjee. The deal pipeline remains strong, primarily consisting of large cost-efficient deals. While the financial services and energy & utilities verticals are expected to grow, manufacturing and retail & CPG verticals are likely to remain weak, said Banerjee. Outlook on deal signing in 2QFY26 and beyond will be crucial, feel analysts at Motilal Oswal Financial Services. While this environment is not conducive to discretionary spending, they expect client enthusiasm to pick up, as serious GenAI projects, especially around productivity gains, start picking up and clients shrug off the uncertainty to focus on critical upgrades. Smart deal structuring, share gains, and a favorable portfolio (low manufacturing exposure) will drive strong growth for mid-tier companies, as per Kotak Institutional Equities. They expect Coforge to lead the growth, followed by Persistent, Hexaware, and Mphasis. TCS, Wipro, and ERD names will likely face cuts in earnings growth after results as per Kotak. Infosys, Tech Mahindra, Hexaware, Coforge, and Indegene are Kotak's key picks In mid-caps, Coforge remains the top pick of MOFSL too, and they also like LTIMindtree Ltd., or LTIM, in an improving environment. Their top picks in the large-cap space remain HCL Tech and Tech Mahindra. Companies that effectively leverage advancements in generative AI and focus on cost-efficiency measures may be better positioned to navigate these challenges. Mid-tier companies are expected to outperform large caps in terms of growth. However, their cash flow conversion is weaker, client concentration is higher, and valuations are stretched, said Banerjee. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Time of India
24-06-2025
- Business
- Time of India
Accenture Q3 numbers show road's still bumpy for IT companies
Live Events Global IT major Accenture's financials for the third quarter of FY2025 announced on Friday suggested continued demand slowdown for the $280 billion Indian software outsourcing business amid weakened deal bookings. This was driven by an elevated level of uncertainty in calendar year 2025 (CY25) versus CY24, analysts and brokerage firms noted in their reports. Accenture follows a September to August fiscal Ireland-headquartered giant technology services company reported an 8% growth from a year-ago March-May quarter to $17.7 billion helped by the consulting business and an increase in financial services and health & public service Accenture's quarterly new bookings declined for the second consecutive quarter with a steeper drop at 6% (year-on-year) YoY compared to a fall of 3% in the previous saw the soft outsourcing deal wins – consulting down by 2.2% YoY and outsourcing deals weaker by 9.8% - as dampening for Indian IT players.'Bookings momentum slowed down, including in generative AI (GenAI)…Demand has not changed significantly, and the environment is not conducive for healthy deal wins,' said a Kotak Institutional Equities report in a note after the Accenture an incremental $2.15 billion to bookings YoY in 9MFY25 from GenAI, overall bookings still declined by $1.75 billion compared to headcount also fell by 10,337 from the previous quarter, the highest-ever quarterly drop for Accenture.'For the Indian counterpart, the slowdown in outsourcing bookings might further intensify conversion challenges on selective pockets, especially the tariff-induced verticals. While we expect BFS should continue its growth momentum in the subsequent quarters,' said brokerage firm Prabhudas Liladhar in its in Accenture plunged 6.8% on Friday. On Monday, the Indian BSE and NSE IT sector index, which accounts for share trading of IT companies, declined 1.5% each. Shares of top companies including Infosys and HCLTech fell over 2% while peers TCS and Wipro dropped more than 1% at the day's close on the firms Coforge , Persistent and KPIT Technologies also faced the brunt of the overall weaker January, the BSE IT index has lost over 13%. However, most analysts expect AI, banking, financial services and insurance (BFSI) and healthcare likely to be high-traction demand book-to-bill ratio remained healthy at 1.2x, which provides reasonable growth visibility over coming quarters, said a sectoral report by Nuvama (formerly Edelweiss) Institutional Equities. 'Over the medium-to-long term, we expect recovery in the macro environment to accelerate enterprise tech spending,' it fourth quarter revenue guidance was moderate at 1-5% growth to $17.0–$17.6 billion. Full year revenue guidance was narrowed at the lower end from earlier estimate of 5–7% to from 6–7% with a 0.5% negative impact of currency movement. Of this, organic growth is projected in the lower single digit at 3–4%.Notably, the quarter included two months—April and May—of heightened uncertainty following the US government's tariffs. This impacted decision making and discretionary spending further due to high-cost pressure on most healthy revenue growth was overshadowed by slightly lower outsourcing growth, slower overall deal wins, excessive headcount reduction (10,400), indicating lower demand going forward, as per an ICICI Securities report. It added there was no revision to the upper end through FY25 revenue guidance, a trend from the last two years.
Mint
20-06-2025
- Business
- Mint
Market volatility hits mid and small-caps: Are large-cap stocks a safer bet now?
The recent volatility in the Indian stock market has taken a toll on mid- and small-cap stocks, as investors grow increasingly cautious amid global uncertainty and elevated valuations, prompting them to exit these segments in search of safer bets in large-cap stocks, which are often perceived as more stable during turbulent phases. Global markets have been on edge this week, with the latest escalation between Iran and Israel adding fresh strain to an already fragile global economy—one still grappling with the effects of trade tensions and the ongoing Russia–Ukraine war. However, the Indian stock market managed to end the week with healthy gains, supported largely by strength in blue-chip stocks. Despite rising crude oil prices, prolonged trade tensions, and limited progress in negotiations between the US and its key trading partners, Indian large-cap stocks have continued to draw investor interest. Optimism around corporate earnings—buoyed by a turnaround seen in the March quarter and expectations of stronger performance in the June quarter of FY26—along with relatively reasonable valuations compared to mid- and small-cap counterparts, has led investors to shift their focus toward these more established, higher-priced stocks. Against this backdrop, both the Nifty 50 and Sensex closed with gains of nearly 2%, while the Nifty Midcap 100 and Nifty Smallcap 100 indices remained under pressure for the second consecutive week, each declining by up to 1%. Recent data also indicates a shift in retail investor preference toward large-cap stocks, as ownership in mid- and small-cap counters fell to a nine-quarter low amid a broader market sell-off during the March 2025 quarter, according to the NSE's report titled India Ownership Tracker. During the March quarter, mid- and small-cap stocks underperformed their large-cap counterparts, further amplifying valuation concerns in these segments. According to the latest analysis by domestic brokerage firm Kotak Institutional Equities, small caps led the earnings cuts, with a 6% reduction in FY2026 EPS estimates compared to a 2% cut for large caps and 3% for mid-caps. On the valuation front, the Nifty SmallCap 100 is trading at a one-year forward price-to-earnings (P/E) multiple of 27.2x—significantly higher than its long-term average and close to the Nifty MidCap 100's P/E of 28.3x. This sharp rise in valuations places the Nifty SmallCap 100 near its historical peaks, levels last seen during previous phases of overheated sentiment, such as mid-2021 and pre-2018, according to domestic brokerage firm InCred Equities. In contrast, the Nifty 50 is trading at a more reasonable 20.7x forward P/E. The narrowing valuation gap between small- and mid-cap stocks is making investors uncomfortable. Analysts believe this has prompted a shift in investor focus toward large-cap stocks. Looking ahead, analysts expect small and mid-cap stocks are likely to underperform in the short term, given their elevated valuations and absence of short-term triggers. Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said, "The recent weakness in the broader market is likely to continue since they are excessively valued, and the ongoing risk-off can lead to further selling in this segment. Money may move from the overvalued SMIDs to the fairly valued, safe large caps in financials, industrials, autos, and real estate." Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
Mint
18-06-2025
- Business
- Mint
Indian cement stocks become dearer than some global peers
India's cement sector is not a cheap bet on an absolute or relative basis. It trades at a one-year forward price-to-earnings multiple of 34x – a steep premium to some global counterparts. The reading is higher than the sector's long-term average. The problem is that stocks of Indian cement makers have elevated valuation multiples despite subdued earnings. In fact, the Indian cement sector has seen large downgrades to consensus Ebitda and earnings per share estimates every year for the past 10 years, says Kotak Institutional Equities. So, what is keeping valuations lofty? Two key narratives seem to fuel optimism. A pick-up in government spending on infrastructure and allied activities in FY26 after a muted FY25 due to state and general elections would buoy cement demand. Additionally, the home building segment is also likely to push demand after real estate launches were weak in FY25 due to delayed approvals. Also Read | Cost pinch is coming for cement companies in Q1 Secondly, pricing discipline, which has been absent lately amid an intensifying fight for market share, will return. Consolidation in the sector, with larger companies acquiring smaller ones, is said to be at its fag end now. So, as demand outpaces supply, cement prices would recover and thus, realisations and profitability. Latest company management commentaries are upbeat, with demand and pricing outlook poised to pick up in the seasonally strong second-half of the year. But the dent in prices has been severe. Price drop According to India Ratings and Research, cement prices fell 5%-6% in FY25, the sharpest annual drop in the past 20 years. The most pronounced price contraction was in south India due to oversupply, followed by the eastern region, it said in a note dated 17 June. Also Read | Is the cement sector consolidation at its fag end? So, repairing realisations may not be easy if demand fails to improve as anticipated amid the recent spate of capacity addition. This would also keep the sector's utilisation levels capped. The return ratios have been poor. Sectors such as cement with a low fixed asset turnover ratio (long-term average of 1x) and mediocre financial returns with return on equity/cash return on capital invested modestly higher than cost of equity/weighted average cost of capital should not have a very high multiple, as per Kotak. On a one-year forward EV/Ebitda basis, the sector trades at a multiple of 21x, higher than the long-term average of 16x. Clearly, unless one of these narratives materialises and leads to earnings upgrades, valuations don't seem justified. Also Read | Cement price hikes in April ease margin fears—at least for now
Mint
17-06-2025
- Business
- Mint
Iran-Israel war: Are small-cap stocks most exposed to Middle East tensions amid high valuations?
Indian stock market: Geopolitical tensions are once again flaring up in the Middle East, as hostilities between Iran and Israel continue for the fifth consecutive day, making investor sentiment jittery towards riskier assets. Global markets have been on edge, with the conflict adding fresh strain to an already fragile global economy, one that is still grappling with the effects of trade tensions and the ongoing Russia–Ukraine war. For the Indian stock market, the Iran–Israel conflict has added to existing concerns around stretched valuations. Although India does not have significant trade dependence on either country, the tensions have triggered a sharp spike in crude oil prices, dampening market sentiment. While local equities initially reacted negatively to the developments, they later rebounded sharply, with strong resilience in large-cap stocks providing much-needed support to frontline indices, helping them trade higher despite global concerns. During periods of heightened market volatility, stocks with rich valuations tend to correct more than those with reasonable valuations. Although the overall market appears stretched following a sharp rally over the last three months, analysts believe small-cap stocks may face further pain if geopolitical tensions persist, as they are more richly valued compared to large-cap counterparts. Vinod Nair, Head of Research at Geojit Financial Services, said, 'Despite ongoing geopolitical tensions between Israel and Iran, the market moved higher, supported by gains in large-cap stocks, as investors maintained their focus on long-term fundamentals during volatile times. Geopolitical developments in the Middle East are likely to influence near-term market sentiment, with any signs of de-escalation being closely monitored. Small-cap stocks are expected to underperform in the short term, given their elevated valuations and lack of immediate triggers.' Recent data also indicates a shift in retail investor preference towards large-cap stocks, with ownership in mid- and small-cap counters falling to a nine-quarter low amid a broader market sell-off during the March 2025 quarter, according to the NSE report titled 'India Ownership Tracker.' Meanwhile, allocation towards large caps has risen, reflecting a growing inclination for the relative safety of blue-chip stocks amid market turbulence. According to the domestic brokerage firm Kotak Institutional Equities, small caps witnessed the largest cuts on their FY2026 EPS estimates. The brokerage notes that continued weakness in parts of the economy has resulted in continued downgrades to consensus earnings across market caps for FY2026E/27E. However, small caps lead the EPS cuts with a 6% cut in their FY2026 EPS estimates versus 2% for large caps and 3% for mid-caps. The downward revisions have been broad-based, with consumer-facing businesses seeing larger cuts. The same can be seen in earnings cuts of individual stocks of the Nifty 500 Index, with 70% of stocks seeing downgrades versus 30% of stocks seeing upgrades over April-June 2025, noted the brokerage. The Nifty SmallCap 100 is trading at a 1-year forward price-to-earnings (P/E) multiple of 27.2x, significantly higher than its long-term average and much closer to the Nifty MidCap 100's P/E of 28.3x. The spike in Nifty small-cap-100 forward P/E valuation to near mid-caps and at a premium to Nifty-50 This is unusual, as small-cap stocks typically trade at a discount to mid-caps due to their higher risk profile and lower liquidity. The sharp rise in valuations places the index near its historical peaks, levels that were last seen during previous periods of overheated sentiment, such as mid-2021 and pre-2018, as per the analysis done by domestic brokerage firm InCred Equities. In contrast, the Nifty 50 is trading at a more reasonable 20.7x forward P/E. The narrowing gap between small- and mid-cap valuations is causing discomfort among investors, particularly in an environment of persistent global uncertainties and uneven earnings visibility. Without a strong pickup in earnings growth, such elevated valuations leave little room for upside and increase the risk of a valuation-driven correction. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
