A 'twilight year' for Indian IT companies

The current financial year would be a twilight year for the Indian information technology sector as the earnings of these companies may witness a declining trend, while there stocks could deliver positive returns, a report says.

According to domestic brokerage firm IDFC SSKI, "FY10 would be a twilight year for Indian IT when financials will likely witness a declining trend though stocks could deliver positive returns."

The earning estimates of top rung IT companies could be impacted by as much as 4-5 per cent for the next financial year largely due to a stronger Rupee and continued challenges on the volume and pricing front.

However, the earnings downgrade cycle for these companies is bottoming out and further downgrades are unlikely "unless there are sharp forex fluctuations and a marked economic deterioration globally," the report added.

Interestingly, the stock prices may see an uptrend driven by early signs of recovery in the global economies and lower valuation.

"We expect Tier I stocks to trade sideways in the near term, as investors continue to focus on sectors benefiting from economic reforms post the 2009 general elections," the brokerage firm said.