Investors on Thursday sold IT shares on concerns over growth prospects of the industry after Infosys Technologies gave a more than conservative earning per share guidance of Rs 79-49-79.88 for the year ending March, against expectations of Rs 80-81.
Software exporters earn a large portion of their revenues from the US. Therefore, every time the rupee appreciates, the margins of these companies take a beating. The rupee has appreciated 13 per cent from 44.24 to 39.30 this calendar year.
Infosys operating profit margin in the September quarter was higher at 31.27 per cent versus 28.73 per cent in the June quarter, despite rupee rise.
However, operating margins of Satyam Computer and HCL Technologies are likely to remain under pressure on account of wage hike in the second quarter.
Analysts are more optimistic on Tata Consultancy Services, India's largest software exporter, which will be out on Monday.
"Tata Consultancy Services may not replicate Infosys results because of diversity in business line and geography," said Rishi Maheshwari, Networth Stock Broking.
Over the past one month BSE IT Index had moved up 13 per cent. Today's correction in the sector has eroded half of its gains. The BSE IT Index ended down 5.59 per cent, weighed by losses in Satyam Computer Services (down 7.5%), Infosys (6.9%), HCL Technologies (5.35%), Tata Consultancy Services (4.72%) and Patni Computers (4.28%).
"IT stocks saw a run-up recently and valuation wise they are not exciting. Companies won't be repeating numbers as they did in FY07. Worries in terms of rupee appreciation and US slowdown still exist. It needs to be seen how these companies meet the challenges," an industry analyst said.
Smaller companies like Polaris Software that generate most part of their revenues from banking, finance, services and insurance sectors face higher chances of getting hit due to the sub-prime mortgage crisis in US.
Software exporters earn a large portion of their revenues from the US. Therefore, every time the rupee appreciates, the margins of these companies take a beating. The rupee has appreciated 13 per cent from 44.24 to 39.30 this calendar year.
Infosys operating profit margin in the September quarter was higher at 31.27 per cent versus 28.73 per cent in the June quarter, despite rupee rise.
However, operating margins of Satyam Computer and HCL Technologies are likely to remain under pressure on account of wage hike in the second quarter.
Analysts are more optimistic on Tata Consultancy Services, India's largest software exporter, which will be out on Monday.
"Tata Consultancy Services may not replicate Infosys results because of diversity in business line and geography," said Rishi Maheshwari, Networth Stock Broking.
Over the past one month BSE IT Index had moved up 13 per cent. Today's correction in the sector has eroded half of its gains. The BSE IT Index ended down 5.59 per cent, weighed by losses in Satyam Computer Services (down 7.5%), Infosys (6.9%), HCL Technologies (5.35%), Tata Consultancy Services (4.72%) and Patni Computers (4.28%).
"IT stocks saw a run-up recently and valuation wise they are not exciting. Companies won't be repeating numbers as they did in FY07. Worries in terms of rupee appreciation and US slowdown still exist. It needs to be seen how these companies meet the challenges," an industry analyst said.
Smaller companies like Polaris Software that generate most part of their revenues from banking, finance, services and insurance sectors face higher chances of getting hit due to the sub-prime mortgage crisis in US.
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