It's time to focus on earnings in our special segment -- Quarter Se Quarter Tak. IT biggies Infosys and TCS will kick off the Q4 earnings season tomorrow. Girish Pai, head of research at Nirmal Bang and Sandip Agarwal, an analyst at Edelweiss shared their views and readings on the sector.
Pai expects pain in margins, both in Q4 and FY20.
“It’s going to come from multiple factors; for the quarter per se it’s going to come from rupee appreciation that has happened,” Pai said on Thursday.
Talking about Infosys, Pai said, “The margins compression is going to come from the investments that the company has made in digital which is basically the companies it has bought, they are going to dilute margins to an extent.”
“So I do expect something like 100 bps cut in the margin guidance; between 22 and 24 will probably move to 21 and 23,” he added.
According to Pai, Infosys will outpace TCS' growth rate in FY20.
Also Read: Why Infosys' shares trade at a discount to TCS
Agarwal of Edelweiss is optimistic on the IT sector and Infosys in particular.
“I think this quarter you will see much significant number, around USD 2.2-2.3 billion of announcement for this quarter. I think the momentum is back in the sector and Infosys has well prepared itself for this kind of growth. So we are very optimistic on Infosys and also the sector from that perspective,” Agarwal said.
"Infosys is our top pick followed by HCL Technologies and Tech Mahindra," he said.