With the International Monetary Fund (IMF) warning of economic slowdown in 90 per cent of the world, earnings outlook for Indian IT companies look gloomy. Adverse conditions in the global markets are affecting the Indian IT sector. Now, all eyes are on TCS and Infosys as their second-quarter results would impact the trading pattern on the domestic bourses.
The US-China trade war, uncertainty amid Brexit turmoil and sluggish services sector in European nations are also impacting Indian IT companies. The adverse factors may dampen the forecasts on quarterly results made earlier, observes an IT analyst. Quarterly numbers of TCS on Thursday and Infosys on Friday will set the tone for the markets.
The manufacturing sector in Germany and other developed nations has been slowing down. Accenture company results signalised a possible drop in the earnings. Further, US banks have reduced ratings and served caution notice on the Indian economy.
The US and EU markets are key for the Indian IT sector. Ahead of the Presidential elections in the US, American companies have turned to be very selective in awarding projects.
According to a report by Cogencis, a global news agency, the top-10 IT companies may post 3-4 per cent growth in earnings and net profit. The entire IT sector has been embracing cost-cutting measures to ease pressure on margins.
Since TCS has more business in Europe, it may impact the financial performance during the second quarter, said Cogencis.
Ms Kristalina Georgieva, the new MD at the International Monetary Fund (IMF), made a forecast of the slowdown across 90 per cent of the globe in 2019. However, the IMF predicted that 40 emerging markets might grow over five per cent. Global trade growth is almost at a standstill now, observed Ms Georgieva. Only the IT sector is outperforming other sectors, and this is helping Indian IT companies.