IT major Infosys will be joined by its larger rival TCS to kickstart the IT sector's first quarterly earnings season of the current fiscal, as the two companies would announce their financials on the same day on July 12.
Historically, Infosys has kickstarted the earnings season for the entire listed space for many years, thus earning the bellwether tag in the market, while TCS has generally followed with its quarterly numbers a few days later.
However, both TCS and Infosys would announce their results for the first quarter of 2012-13 this Thursday, but it would be the financial services giant HDFC to grab the first slot among major companies with its own set of results tomorrow.
Besides being the first major company to report its results, Infosys' bellwether tag has also been derived from the fact that the trend in IT sector generally reflects the overall economic sentiments, as their businesses depend a lot on spending power of companies across the sectors.
While the experts are optimistic about broadly good results from IT space due to falling rupee valuation, the overall sluggishness in the economic activities could pose some concerns.
On the other hand, HDFC's numbers tomorrow would also be keenly watched to gauge the consumers' spending and disposable income trends, as the company is the market leader in the home loan market and also a major player in fixed deposits business. Its group company HDFC Bank would also announce its results later this week on July 13.
In the IT sector, Infosys and TCS would be followed by quarterly results of other players like HCL Tech and Wipro later.
Analysts expect the IT companies will post strong numbers in the June quarter thanks to the depreciating rupee against US dollar. Although, overall earnings weakness, seen in the March 2012 quarter, to persist for other blue-chip companies in the first quarter due to high inflation and slowing economic growth.
According to a report by Motilal Oswal Financial Services, average sales growth for IT companies are expected at 29.3% year-on-year in the first quarter of fiscal 2012-13 and profit after tax (PAT) is projected to rise by 32%% y-o-y in the June quarter.
"Technology will likely to report sales growth of 29.3% year-on-year, led by sharp rupee depreciation. While EBITDA is likely to grow 39.5% year-on-year, PAT would grow 31.7% year-on year," the report said.
"For the sector, this is one of the highest growth quarters in a long time, with across the board contribution by companies," it added.
The report said that Infosys and HCL will lead the pack with 39% year-on-year earnings growth each, closely followed by TCS with a growth rate of 35%.