- Introduction:
- As Information Technology (IT) companies prepare to release their fourth-quarter earnings, a comprehensive analysis reveals varied performances within the sector.
- Q4 Performance Overview:
- In Q4 of FY24, IT stocks collectively delivered negative returns, with the Nifty IT Index declining by 2.2%.
- Despite this, individual stocks exhibited diverse performance trends, with some recording positive returns.
- Performance of Key IT Stocks:
- Tata Consultancy Services (TCS) saw a gain of 1.7% in Q4 FY24, reflecting robust performance over the past six months and one year.
- HCL Technologies witnessed a notable 4.03% increase in Q4 FY24, with significant growth observed over both short and long terms.
- Infosys shares were up by 3.4% in the fourth quarter of FY24, displaying consistent growth trends over six months and one year.
- Wipro experienced muted gains of 0.62% in Q4 FY24, although it demonstrated moderate increases over the past six months and one year.
- Underperforming Stocks:
- LTI Mindtree and Tech Mahindra underperformed, with LTI Mindtree dipping over 21% in Q4 FY24 and Tech Mahindra losing almost 4%.
- Despite this, Tech Mahindra saw a rise of 4.7% in the last six months and 13% in the past one year.
- Market Indices Comparison:
- Nifty IT underperformed Nifty 50, with the benchmark index gaining 2.7% in Q4 FY24.
- Analyst Expectations:
- Analysts anticipate muted constant currency (CC) revenue growth for Tier-1 IT service companies, contrasting with relatively healthy revenue growth for Tier-2 companies.
- Sharekhan by BNP Paribas expects TCS to lead revenue growth among Tier-1 companies, while LTTS/Persistent/Coforge are expected to report strong sequential revenue growth among Tier-2 companies.
- InCred Equities highlights the sustainability of growth momentum for Tier-II companies, emphasizing unfavorable entry valuations. They prefer restructuring stories, with Tech Mahindra being their preferred stock pick.
Key Points:
- Q4 performance of IT stocks varied, with some witnessing positive returns despite sector-wide declines.
- Analysts expect Tier-1 companies to experience muted revenue growth, while Tier-2 companies are anticipated to perform relatively better.
- Tier-II companies are seen as having the potential for sustained growth, although entry valuations remain unfavorable. Tech Mahindra stands out as a preferred pick due to restructuring opportunities.
