Indian IT Stocks: Time to Bail?

With worries about corporate technology spending rising, and the financial sector in turmoil, it might be time to step away from the Indian IT services companies.

Bhuvnesh Singh, an analyst with Credit Suisse, this morning cut his recommendation on the sector to Underweight from Market Weight, and warned that “a majority of Indian IT companies are likely to miss” Q3 guidance. “While companies are accepting a weaker environment, formal guidance continues to indicate a second half recovery that could disappoint,” he writes. “We are already picking up data points on project postponements and bill rate pressures. Companies are also taking steps to restrict hiring, which clearly implies low management visibility.”

In connection with his call on the sector, Singh cut his rating on Infosys (INFY) to Neutral from Outperform. “Our conversations with Infosys management clearly indicates that the environment is worse than its earlier projections,” he writes. “We believe this could pressure full-year numbers of the company.” Singh notes he now has no positive ratings on any companies in the sector; he also cut ratings today on Indian-traded Tata Consultancy and Mindtree.

Infosys today is down $1.80, or 5.1%, to $33.38.

Comments

[Thomas Victor:]

Time to bail??

That would have been an appropriate title some time ago when it's price was higher. But now it is at a 52 week low and it seemed like a good buying opportunity so I took the plunge.

2008 Sep 24 02:29 PM

[andyn:]

i think this is dead money for the next few qtrs.
they hired HUGE and with revenues going down, margins are sure to come down. stay away till next year

2008 Sep 25 08:48 AM

[stockezy:]

Satyam Computers might be a better company in this space. It is listed on NYSE - stockezy.com/stocks/qu...

Also for investing in India I recommend - Tech Mahindra
stockezy.com/stocks/qu...

2008 Sep 25 07:46 PM