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<ul><li>In the last month, hopes of US business revival pushed up the Nifty IT index by over 9%.</li><li>While markets see it as an ‘inflection point’, most analysts choose to wait and watch before going for earnings upgrades.</li><li>Margin performance of large companies is impressive but cracks appear in mid-tier, say analysts. </li></ul>Shares of IT services companies have been gaining momentum, with the Nifty IT index rising by 9.7% in the past month. While the sector’s earnings growth dwindled in the third quarter (Q3) of the current financial year (FY24), top tier companies delivered better than expected earnings reading with a healthy margin performance. The top six IT companies reported a -1.7% to 6% constant currency growth sequentially in Q3, and their margins improved due to operational performance. “Margin performance emerged as another positive. That helped arrest earning downgrades for top-4. Market possibly took this as an inflection, spurring sentiments, reflected in 7% up move in Nifty IT year-to-date. We however believe earning upgrades won’t be as forthcoming,” said a report by <keyword id="20489752" type="General" weightage="20" keywordseo="j-m-financial" source="keywords">J M Financial</keyword>. Markets upbeat, but BFSI recovery crucial The market, nevertheless, is upbeat on the sector with the top three players giving double digit returns in the last one month. The Street is betting that the improved outlook on the US macroeconomic situation might lead to spillover gains for the Indian IT majors. A report by <keyword id="20489750" type="General" weightage="20" keywordseo="systematix" source="keywords">Systematix</keyword> ‘Indian IT poised for an inflection’ says that the top three players may see revenue recovery FY25 onwards, boosted by continued deal momentum. “Indian IT companies trading at higher than historical valuations reflect the structural positivity beyond the near-term uncertainties. Hence, the possibility of numbers turning better than the current projections holds the possibility of further rerating,” says Systematix. However, this upbeat sentiment is not shared by all the sector experts. As of the latest earnings report, most companies continued to suffer from slow revenue conversion from deals, furloughs and more. Even if the much anticipated interest rate cuts pan out this year, the US companies’ performance does not offer too much hope of them reinstating their IT budgets, a few insist. J M Financial says that S&amp;P 500 companies’ revenue upgrades have been minimal, and especially low in consumer discretionary, hi-tech and telecom sectors. It reflects continued cost optimization. Moreover, in the banking and financial sector, which is key for the IT companies, there is still pain. “The pick-up in FY25 is highly contingent on banking and retail. Turning to financial results and commentary from large banks, we are not optimistic of a major surge in spend by banks. Hence, our growth forecast for FY25 remains in the range of 6-7%,” said a report by HSBC. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Stock </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30-day returns </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">TCS </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.65% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Infosys </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12.85% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HCL Tech </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">13.33% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Wipro </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">9.43% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Coforge </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.97% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mphasis </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-2.23% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">LTTS </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.95% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">LTIM </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-8.03% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Persistent </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">17.57% </td></tr></tbody></table>Source: NSE Cracks in the mid-tier If at all there is demand revival, the top four companies like TCS, Infosys, Wipro and HCL Tech are best placed to gain from it. While the top tier rationalized costs, mid-tier companies like LTTS, <keyword id="20083317" type="General" weightage="20" keywordseo="mphasis" source="keywords">Mphasis</keyword> and LTI Mindtree had missed earnings estimates in Q3. “As demand has softened, mid-tier IT services have begun to struggle on profitability. We think this pressure may remain in the short term until demand picks-up meaningfully, which is unlikely, in our view,” said HSBC which added that ‘mid-tier is now showing cracks’. New deal wins were also mixed for mid-tier companies, unlike their larger counterparts where it was robust. Coforge, <keyword id="20489751" type="General" weightage="20" keywordseo="ltim" source="keywords">LTIM</keyword> and Persistent had good deal wins in Q3, Mphasis’ deal win total contract value came in weak at $241 million. Hyperscalers, large cloud service providers, have shown positive results for the quarter. “While that gives hope for better downstream demand, we need to see if that results in net new demand or mere reprioritisation of IT budgets,” said J M Financial. In spite of exuberance in the stock performance, most analysts are choosing to ‘wait and watch’ before they build their expectations of the IT sector's recovery.

IT stocks rally on core market pick up hope but is the sector out of the woods yet

<ul><li>India’s outsourced EMS market is expected to grow at 33% for the next four to five years.</li><li>EMS companies have guided revenue CAGR of 30-40% for the next few years.</li><li>Recently listed EMS companies have piqued the interest of investors.</li><li>Even as <keyword id="18348200" type="General" weightage="20" keywordseo="ems-stocks" source="Orion">EMS stocks</keyword> are now well valued, their high earnings potential makes them a long term play, say brokerages. </li></ul>In the last one year, a number of new companies in the electronics manufacturing sector (EMS) made their debut in public markets — be it Kaynes Technologies, Syrma SGS or Avalon Technologies. Not only have most of them given double digit returns since listing, their management also guided strong topline and bottomline growth — indicating a huge run up ahead. As per a research report by Nuvama, India’s outsourced EMS market has been growing at a compounded annual growth rate (CAGR) of 22% to $26 billion in the last five years. In the next four to five years, it’s expected to grow faster at a CAGR of 33% and to $100 billion. “What doubles down in India’s favour is, for several global majors, India is now also a huge demand centre and the highest growth contributor. Capitalising on these changing dynamics, the GoI’s policies such as PLI and import curbs are further fuelling a massive electronics super cycle in India,” says Nuvama. As the world moves towards a ‘China plus one’ strategy, India offers many advantages like lowest labour costs in Asian countries, a huge working-age population, high basic education levels and conducive manufacturing policies. Most of the Indian players in the sector are into original design manufacturers (ODM) and original equipment manufacturers (OEM) ranging from printed circuit boards to box builds and a range of businesses with diverse value and volume play. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Stock </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">YTD returns </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">*Kaynes Technologies </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">150% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">*Syrma SGS </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">52.2% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">*Avalon </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30.9% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Dixon </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">23% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Amber </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.5% </td></tr></tbody></table>Source: BSE *Returns since listing Missed the bus? In the last few months, the stocks of EMS companies have had a huge run up. Most leading players guided their revenue to grow at a CAGR of 30-40% for the next few years – and that piqued the interest in this industry. “Stock prices of EMS companies have soared up to 75% in three months on strong management guidance. Thus, any major deviation from actual results could cause these scrips to de-rate significantly,” says a report by Systematix Institutional Equities. A few other brokerages however believe in the medium to long term potential of these stocks – given the opportunities ahead. “A significant tailwind on the back of uptick seen in overall manufacturing backed by strong order backlog and high enquiry levels along with thrust on increased localization augurs well for the EMS space as India steps up to develop its domestic manufacturing ecosystem,” says a report by Haitong. Nuvama judges the long term potential of the stocks by comparing it to upcycle seen in specialty chemicals. About 15 Indian specialty chemicals companies had benefited from China plus One, between FY14–23 – when their revenues tripled, EBITDA quadrupled and net profit surged seven times. “The key aspect for EMS stocks is that they are at very early stages in a long, high-growth cycle. Hence, even if one assumes that valuations have discounted the story, earnings compounding over the next five–seven years still have potential to deliver extremely healthy stock returns in our view,” says Nuvama. To take advantage of the growth cycle, companies in the sector would need to make capital investments to build scale, competitive advantages with capability upgrades. “We would focus on Return on Capital Employed (RoCE) rather than margins to judge an EMS business; Dixon, Kaynes and Avalon rank high in this context,” says Systematix. Syrma and Kaynes both have the ability to self-fund their EMS growth paths entirely, says Nuvama. Yet the sector is not without its downside risks — apart from a general economic slowdown within and outside the country that can dampen demand, lack of business commitments from clients and inability to sustain advancements in technology and emerging trends – can veer off these companies from their high growth path.

Electronics manufacturing stocks in focus as India enters super cycle phase

<ul><li>India plans to start using 20% <keyword id="440140" type="General" weightage="80" keywordseo="Ethanol-blended-petrol" source="Orion">ethanol blended petrol</keyword> from 2025.</li><li>Currently, most petrol pumps give 10% ethanol blended petrol.</li><li>Economists argue that ethanol production in the future will have to rely more on maize and less on sugarcane and rice. </li></ul> At present, when you go to fill petrol, the petrol you get is mixed with 10% ethanol and the government is looking to double this by 2025. Prime Minister Narendra Modi rolled out 20% ethanol-blended petrol in select gas stations in 11 States and Union Territories earlier this year as part of a programme to increase use of biofuels to cut emissions as well as dependence on foreign exchange-draining imports. First, how is ethanol made? Most of the fuel ethanol produced around the world is made by fermenting the sugar in the starches of grains such as corn, sorghum, and barley, and the sugar in sugar cane and sugar beets, as per the US Energy Information Administration. <keyword id="13884282" type="General" weightage="60" keywordseo="what-is-ethanol-blending" source="Orion">What is ethanol blending</keyword> and how does it help? <keyword id="146615" type="General" weightage="100" keywordseo="ethanol-blending" source="Orion">Ethanol blending</keyword> is nothing but blended motor fuel containing ethyl alcohol that is at least 99% pure and is derived from agricultural products, and blended exclusively with petrol. An ethanol blended petrol helps on two counts. One, ethanol is a biofuel and so it is good for the environment. Second, it helps India as a country to cut down on its crude oil import bills. Ethanol and the environment Grain-based ethanol cuts greenhouse gas emissions significantly by 44 to 52% compared to gasoline, according to the US Department of Energy's Argonne National Laboratory. A report by Renewable Fuels Association says that researchers from Harvard, MIT, and Tufts have concluded that today's corn ethanol offers an average GHG reduction of 46% versus gasoline. Emerging technologies promise to boost that reduction to near 70% in the next few years, according to USDA. So, what is the government’s plan? The government has said it plans to push up the current 10% ethanol blended petrol to 20% in the next two years across India. This work is happening in two phases. In the first phase, 15 cities will be covered and then it will be expanded throughout the country in the next two years. Consumer Affairs Minister Piyush Goyal has said that the government is confident of achieving its target by 2025. Is E-20 petrol available currently? E-20 (petrol blendend with 20% ethanol) was initially available in only 84 petrol pumps in the country. A media report says that it is currently available in close to 1,000 stations. It is noteworthy here that the price of ethanol blended petrol isn’t different for the consumer. Challenges being faced by the industry Currently, most of the ethanol being produced uses either sugarcane on rice as its raw material. Both these crops are water intensive. A month back, when rice prices shot up, The Indian ethanol manufacturers faced a tough time as rice supply was stopped to the industry. This has led to agricultural economists like Ashok Gulati to advocate relying on maize as a policy. Price hike demand accepted The government hiked ethanol rates a month back after the industry demanded a hike arguing without proper returns there cannot be additional investments to boost supply. Now, the purchase price of ethanol produced from rice has been increased by ₹4.75/litre to ₹60.29/litre and for ethanol produced from maize, price has been hiked by ₹6.01/litre to ₹62.36/litre. The reliance on sugar… The Niti Aayog estimates that India will require 1,400 crore litres of ethanol to achieve its target of 20% blending by 2025. This, in turn, means that there is a big jump required in the production of sugar. A report by the Hindu states that out of the 550 crore litres of ethanol that has been produced since November last year, 450 crore litres came from the sugar industry. What about falling sugar production and its impact? Erratic rainfall in the 2023 monsoon season means that sugar production in India will be hit. In fact, a report by Reuters says that India, the second biggest producer of sugar globally, is considering banning sugar exports for the first time in seven years to fight the deficit. Moreover, sugar prices in the country have jumped by more than 3% in a fortnight to their highest level in six years. Concerns about sugar production... The Indian Sugar Mills Association (ISMA) has forecasted a 3.3% production fall in the current sugar year to 31.7 mn tonnes. It is roughly estimated that the country consumes 27.5mn tonnes leaving only a surplus of approximately 4 mn tonnes, as per a Systematix Institutional Equities report. This will hit ethanol production and thus the push to shift to maize by the government. How have the <keyword id="97985" type="General" weightage="40" keywordseo="sugar-stocks" source="Orion">sugar stocks</keyword> fared? Sugar stocks have had a mixed bag performance for most of the past year. While Balrampur Chini is up 3.4% and Dalmia Bharat Sugar is up almost 10% year-to-date, Shree Renuka Sugars and Dwarikesh Sugar have slipped over 7%.

Explained: What is ethanol blending, impact on environment and challenges faced by India

Equity MF flows more than double in September as investors buy the dip – ICICI Bank is the MF darling

In <keyword id="6369763" type="PERSON" weightage="100" keywordseo="Vishal-Sikka">Vishal Sikka</keyword>’s leadership, <a href="http://www.businessinsider.in/articleshow/52202635.cms">Infosys</a> is doing one wonder after another. After it snatched away the bellwether tag from <a href="http://www.businessinsider.in/Indian-IT-firms-huge-bids/articleshow/51995134.cms">TCS</a> after a gap of four years, it is now going to do what nobody in the IT industry would have thought: replacing Cognizant to become number one. 
 
The 35-year old IT giant came to the number one position in the IT space within just 21 months of <a href="http://www.businessinsider.in/Here-is-how-Vishal-Sikka-has-become-the-man-Infosys-always-wanted/articleshow/51454896.cms">Sikka taking the charge</a>, but looks like the man is on some mission. 
Also read: <a href="http://www.businessinsider.in/Infosys-growth-story-is-unstoppable-and-it-may-become-a-20-billion-company-by-2020/articleshow/51252593.cms">Infosys’ growth story is unstoppable and it may become a $20 billion company by 2020</a> 
 
In addition to his achievements, one might also see that Cognizant's first quarter results were <a href="http://www.businessinsider.in/First-time-in-14-yrs-Cognizant-posts-slowest-quarter-due-to-volatile-markets-slow-spending/articleshow/52154916.cms">not that great</a>, with the company reporting its slowest quarterly revenue growth in 14 years at 10%. 
 This was the right strike time for <keyword id="6354512" type="CITY" weightage="100" keywordseo="Infosys">Infosys</keyword>, which has pinned a revenue growth of 11.8-13.8% in constant currency terms for FY 2016-17. This way, it aims to beat Cognizant in revenue growth for the first time in 13 years and only the fifth time since 1996. 
 
If that happens, Infosys will become the fastest growing IT services company in the world, ahead of its bigger rivals like TCS and Cognizant. 
 
When talking of stock performance, Infosys has left Cognizant far behind, with its American depository receipt (ADR) growing 18% in the past 12 months on the NYSE. On the other hand, Cognizant has seen a mere 2.4% rise on the NASDAQ. 
 
"Over the years what has happened is that Cognizant growth rate is coming down from what it used to be a couple of years back. Earlier it used to be a good leading indicator. But as we have seen, the industry growth rate has been coming off over the years and the growth differential between Cognizant and performing leading Indian IT companies has reduced," Systematix VP Rahul Jain told ET. 
 
"To take a clear view of how the growth looks up for other Indian vendors compared with Cognizant, that comparison is becoming less and less relevant," he added. 
 
<a href="https://qzprod.files.wordpress.com/2015/07/rtr4kqhe.jpg?quality=80&amp;strip=all&amp;w=1600">Image source</a>

You Searched For "systematix indian it" and got 5 results

IT stocks rally on core market pick up hope but is the sector out of the woods yet

Katya Naidu

Electronics manufacturing stocks in focus as India enters super cycle phase

Katya Naidu

Explained: What is ethanol blending, impact on environment and challenges faced by India

Abhishek Jha

Equity MF flows more than double in September as investors buy the dip – ICICI Bank is the MF darling

Rounak

Bhakti

Infosys might soon replace Cognizant to become the industry leader

BI India Bureau

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