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IT stocks ascend as the recent US Federal Reserve meeting signals rate cuts. Driven by robust US economic data, Indian IT companies anticipate increased business. The concurrent weakening of the Indian Rupee and the US economic strength further favour this upward trend.
With 55.5% of IT industry exports shared by the US and Canada, the anticipated rate cuts in the US are poised to benefit American companies, enabling them to borrow at more affordable rates. The Federal Reserve’s indication of potential interest rate cuts in 2024 has influenced the IT industry’s restrained participation in the bullish market trends.
Favourable economic indicators from the US have propelled the upward momentum of IT stocks. Notably, the revelation of better-than-expected job data has relieved pressure on the US Federal Reserve in its ongoing battle against inflation. Despite the ongoing struggle, optimistic economic signals point towards an imminent surge in demand within the US economy.
The depreciation of the Indian Rupee is proving advantageous for major IT companies, given that they receive payments in US dollars. The consistent decline of the rupee over recent quarters has enhanced the competitiveness of IT firms globally, making exports more affordable as the rupee weakens.
As the US Federal Reserve reduces interest rates, the allure of the US bond market diminishes for investors. Consequently, they are turning their attention to emerging markets, with the Indian market emerging prominently. This shift in focus is particularly notable in the wake of the Fed’s interest rate adjustments, making IT and other segments in India more appealing to Foreign Institutional Investors (FIIs).
Birlasoft, based in Pune and part of The CK Birla Group, specializes in computer programming and consultancy. With over 10,000 professionals, it focuses on software development and IT consulting, primarily serving sectors such as Banking, Financial Services, Insurance, Life Sciences, Energy Resources, Utilities, and Manufacturing.
| Mar-22 | Jun-22 | Sep-22 | Dec-22 | Mar-23 | Jun-23 | Sep-23 | |
| Sales | 1,101 | 1,154 | 1,192 | 1,222 | 1,226 | 1,263 | 1,310 |
| Sales Growth | 4.8% | 3.3% | 2.5% | 0.3% | 3.0% | 3.7% | |
| Operating Profit | 175 | 170 | 176 | 7 | 167 | 193 | 207 |
| OPM % | 16% | 15% | 15% | 1% | 14% | 15% | 16% |
| Net Profit | 133 | 121 | 115 | -16 | 112 | 138 | 145 |
| NPM % | 12.1% | 10.5% | 9.6% | -1.3% | 9.1% | 10.9% | 11.1% |
| EPS in Rs | 4.75 | 4.31 | 4.23 | -0.6 | 4.08 | 5 | 5.27 |
Founded in 1994, Affle is a global technology company. It boasts a proprietary consumer intelligence platform that converts ads into recommendations, empowering marketers to efficiently identify, engage, acquire, and drive transactions with both potential and existing users.
| Mar-22 | Jun-22 | Sep-22 | Dec-22 | Mar-23 | Jun-23 | Sep-23 | |
| Sales | 315 | 347 | 355 | 376 | 356 | 407 | 431 |
| Sales Growth | 10.2% | 2.3% | 5.9% | -5.3% | 14.3% | 5.9% | |
| Operating Profit | 58 | 68 | 71 | 80 | 69 | 78 | 87 |
| OPM % | 18% | 20% | 20% | 21% | 19% | 19% | 20% |
| Net Profit | 69 | 55 | 59 | 69 | 62 | 66 | 67 |
| NPM % | 21.9% | 15.9% | 16.6% | 18.4% | 17.4% | 16.2% | 15.5% |
| EPS in Rs | 5.14 | 4.09 | 4.4 | 5.18 | 4.68 | 4.97 | 5.01 |
Formerly known as Tanla Solutions Ltd, Tanla Platforms Ltd is a cloud communications provider headquartered in Hyderabad, India. Specialising in A2P (application to person) messaging, the company enables businesses to effectively communicate with their customers and intended recipients on a global scale.
| Mar-22 | Jun-22 | Sep-22 | Dec-22 | Mar-23 | Jun-23 | Sep-23 | |
| Sales | 853 | 800 | 851 | 870 | 833 | 911 | 1,009 |
| Sales Growth | -6.2% | 6.4% | 2.2% | -4.3% | 9.4% | 10.8% | |
| Operating Profit | 184 | 131 | 140 | 151 | 166 | 182 | 197 |
| OPM % | 22% | 16% | 16% | 17% | 20% | 20% | 20% |
| Net Profit | 141 | 100 | 110 | 117 | 120 | 135 | 143 |
| NPM % | 16.5% | 12.5% | 12.9% | 13.4% | 14.4% | 14.8% | 14.2% |
| EPS in Rs | 10.36 | 7.4 | 8.14 | 8.58 | 8.95 | 10.07 | 10.61 |
Nucleus Software, a trailblazer in retail and corporate banking software since 1986, delivers lending and transaction banking products to the global financial services industry. Their software drives the operations of 200+ financial institutions across 50+ countries, offering support for retail lending, corporate banking, cash management, mobile and internet banking, automotive finance, and various other business domains.
| Mar-22 | Jun-22 | Sep-22 | Dec-22 | Mar-23 | Jun-23 | Sep-23 | |
| Sales | 153 | 129 | 130 | 169 | 206 | 207 | 205 |
| Sales Growth | -15.7% | 0.8% | 30.0% | 21.9% | 0.5% | -1.0% | |
| Operating Profit | 25 | 15 | 11 | 48 | 83 | 63 | 52 |
| OPM % | 16% | 11% | 9% | 28% | 40% | 30% | 25% |
| Net Profit | 18 | 11 | 11 | 38 | 68 | 54 | 45 |
| NPM % | 11.8% | 8.5% | 8.5% | 22.5% | 33.0% | 26.1% | 22.0% |
| EPS in Rs | 6.83 | 4.02 | 4.12 | 14.32 | 25.27 | 20.01 | 16.65 |
With favourable global macro conditions, the IT sector is poised for a bullish outlook. Notably, the Nifty IT index has surged by 10% in December. As the earnings season approaches, the imminent financial reports are expected to provide further clarity on the sector’s trajectory, adding a layer of anticipation to the already positive landscape.
Disclaimer:This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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