Let me get your take on why this whole brouhaha about IT stocks and the concern that IT companies may be in for a very tough 2023 essentially because they are so linked to a global economy which looks like it is heading for some major headwinds?
Yes, the global economy is indeed heading towards a sort of a mild growth. The economic activity across the globe is starting to slowdown commencing with US itself and that has got to do with how Fed is moving from a QE situation to a QT situation.
In such a scenario you would find that most of the financial services companies tend to see slowdown in their earnings, slowdown in their business growth and that directly affects most of the IT companies. IT services companies of India service the big banks that have spread across the globe not only do they service the banks they also service primarily the consumer facing industries.
The retail, the communication, the hospitality kind of industries are definitely seeing a slowdown and that is what is worrying a lot of analyst about the IT sector because the services growth for them will come only if IT budgets get enhanced and then that IT budget enhancement can only come if the companies have spared profits.
In a normal year they would have typically substantial spare profits but in a recessionary kind of year or in a slow session kind of year those spare profits are not really available but it is too early to say that because at the end of the day digitisation has been a strong move that has been happening across the globe and there is still a lot of work left to be done.
In terms of numbers now what will you be looking out for, what will be the key data points commentary that the market will be looking at very-very closely to know if this is the regular Q3 kind of lull that we are looking at and whether the next financial year story will be any different? What will be those key indicators that you will watch out for?
It is actually a wrong quarter to really look at for any guidance from Infosys. Typically this is a quarter when Infosys will only talk about guidance for the year about to end in March, they will not talk about the guidance for the upcoming year that something that will come later down the year. But there will be a hint available in the form of deal wins that they will have.
There will be a hint available in the form of headcount, there will be a hint available in terms of what kind of margin expansion is happening and there will be a hint available in terms of how their geographical spread is. All these numbers will be vital to really analyse and see whether growth momentum is going to remain strong. Deal wins have been very strong for most of the IT companies. I had said before as well that the deal wins for the IT industry was upward of something like 15% year on year growth for the past two years. I would say with that kind of deal pipeline you will have revenue flow continuing into several years from now but unless that gets supplanted by newer orders, newer wins it is going to be a little tough for most of the IT services companies.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)