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HDFC Securities Institutional Equities
IT sector is expected to post resilient Q2 performance in context of the current macro environment. Tier-I IT is expected to deliver sequential growth in the range of 2.4% to 4% constant currency.
Cross currency impact severity will be similar to last quarter with -1.3% to -1.8% sequential impact for tier-I. Although a larger band (0.9% to 5.3% QoQ), mid-tier IT's growth outperformance (versus tier-I) is expected to continue in Q2.
Within the midtiers, Tata Elxsi Ltd., Mindtree Ltd., and Persistent Systems Ltd. are expected to lead at above mid single digit sequential growth.
Supply-side normalisation (monthly decline in job postings and job indices) can be construed as positive from the operational/margin perspective.
Despite the macro challenges in Europe, contracting activity remains strong (Tata Consultancy Services Ltd.-M&S, Boots, Nokia, Zurich Insurance; Infosys Ltd. -Telenor, L&T Technology Services Ltd. -BMW, Persistent-Monument Bank).
Accenture's outsourcing bookings are at all-time high (also impacted by higher deal durations) and the top end of revenue guide also indicates demand resilience.
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