Top-tier IT exporters are likely to continue their growth momentum in the June quarter despite weak European economies.

Also, the latest visa restrictions imposed by the UK and a sharp depreciation in the pound and the euro against the dollar are less likely to have any major impact on the performance of IT players in the near term.

However, the announcement of a major cut in the IT budget by petroleum giant BP may have a marginal impact on revenues. The June 2010 quarter has been relatively stable for top IT companies in terms of order intake from US clients and the average dollar-rupee relationship during the quarter.

Top players have so far bagged 3-5-year deals worth $1 billion during the quarter. Another indicator of a demand revival is the impressive performance of Accenture in the May 2010 quarter. The US-listed IT solutions provider reported a 6-8% growth in most of its verticals, which was the highest in six quarters.

In its latest sector report, Macquarie Research points out that Accenture has shown a 4% rise in its outsourcing order book sequentially during the May quarter.

Further, the high single-digit growth in its financial services vertical indicates that the recovery is on track. This augurs well for Indian IT players which earn nearly half of their revenue from this segment.

An appreciation in the rupee hurts the realisation per unit of the foreign currency. In the June quarter, the average rupee rate against the dollar remained more or less stable from the previous quarter. On the other hand, the rupee has sequentially appreciated by 5% against the pound and nearly 10% against the euro on an average during the June quarter.

This means, the forex volatility in the June quarter may have a limited impact on IT players, including TCS, Infosys, Wipro, and HCL Technologies, which earn greater than 60% revenue in dollars.

In contrast, Tech Mahindra, Mastek, and other players, which have a higher exposure to the pound, are likely to report lower profits.

Analysts at BofA Merill Lynch expect a 4-6% volume growth for the top players in the June quarter. They also anticipate around a 5% jump in the annual earnings-per-share guidance of Infosys for FY11.

For the next three quarters of the current fiscal, IT players, including TCS, Infosys, and Wipro, may see a marginal impact of BP’s decision to reduce its IT spends for the year from over $2 billion to $300 million.

BP is struggling to cut costs in order to reduce the impact of the penalty it incurs, following its oil spill in the Mexican Gulf. Hence, its decision to cut budget doesn’t mirror the overall budgeting scenario.

Some analysts also believe that the UK’s decision to cut tier-II visa permits is not likely to hurt Indian IT exporters. According to analysts at Religare Institutional Research, this is because IT visas don’t fall under the concerned category.

Source:http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/IT-sector-Companies-can-grow-despite-Europe-slump-forex-volatility-/articleshow/6112291.cms