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The Due to slow growth in banking and financial services, the top five Indian IT firms are expected to cut full year forecast.
Among others, Brexit, weaker discretionary spending and growing pricing pressure in the traditional business will also be factors due to which Indian IT firms will trim expectations.
TCS and Mindtree have already toned down their expectations and Infosys, which has already cut its forecast once this year, is widely expected to lower its guidance again.
"Revenues at the top-5 large cap companies in our coverage universe are expected to grow by just 1.5% QoQ in Q2FY17 or about 2.3% in CC terms -- which is the slowest Q2 growth in the past decade. HCL Tech and Infosys will lead revenue growth. Wipro will lag,” Kuldeep Koul, analyst with ICICI Securities, told ET.
"The demand environment for IT services remains weak with clients underspending budgets and several projects cancelled/postponed. We also expect management commentary and guidance to remain muted,” said Sagar Rastogi, analyst with Ambit Capital.
It is to see whether National Association of Software and Services Companies (Nasscom) will retain its 10-12% constant currency growth target for the year.
"I expect them to cut it. Even if they retain the target because captives are doing better, that is an even worse reflection on the Indian IT companies. It will really put a number to the fact that clients may be pulling work in-house,” an analyst with a Mumbai brokerage told ET.
The $108-billion IT sector employs nearly 3.7 million people. However, due to bad quarterly results, the hiring is likely to get impacted.
"Margins are likely to decline for HCL Tech and Wipro due to wage hikes, stay flattish for Tech Mahindra due to one-time employee restructuring expense, and for Infosys, given the impact from options expensing, and grow modestly for TCS on operational efficiencies,” said ICICI Securities' Koul.