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MUMBAI – The American Depository Receipts (ADRs) of technology majors Infosys and Wipro slumped in trade on Thursday on the New York Stock Exchange as peer Accenture Plc’s growth guidance left investors in dismay.

Accenture, which released its earnings for the three months ended August, guided a meagre 2-5% growth in annual revenue in the backdrop of a subdued business environment for IT services.

Accenture follows the September-August financial year. For the quarter ending November, the IT major expects revenue to be in the $15.85-16.45 billion range. This implies a fall of up to 2% at the lower end in local currency terms and a maximum of 2% growth at the upper end of the guidance.

The ADRs of Infosys dropped a gnarly 3% to $16.96, and those of Wipro fell 2.5% to $4.83 on the NYSE.

Their shares could see a fall in trade on Friday. On Thursday, Infosys shares ended 2% down at Rs 1,439.45, and Wipro lost 2.5% to Rs 405.36.

Dalal Street investors will be closely tracking the September quarter results of Indian technology companies which will be released in October.

While releasing the June quarter earnings, sector major Infosys sharply reduced its FY24 growth guidance in view of the global macroeconomic slowdown. HCL Technologies too, had cut its growth guidance for FY24 and bellwether TCS painted a bleak picture for business momentum.

While the earnings might remain soft in the September quarter as well, some analysts have gradually started turning positive on the sector.

Global investment bank Morgan Stanley turned positive on the IT pack and raised its price target for the entire pack, citing improving prospects for margin growth and expected recovery in earnings in FY25.

Strong outlook on FY25 revenue growth, improving margins, and double-digit EPS growth should keep valuations afloat, the investment bank said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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Mayuresh Joshi , Head-Equity Research, India, William O’Neil , says “the commentary surrounding order wins by IT companies remains extremely strong because the targeted bucketed list that they probably have between a million dollars to five million and to ten million for midcap IT companies those order wins and those transformational deals when it comes to AI and the associated space is there itself still continues at a rapid and a very good pace. The other space, ER&D, where a lot of companies like a KPIT, Tata Elxsi , Sonata have done well and continue to do well.”

Is a move on Reliance sustainable and are there enough fundamental triggers in place?
Singapore GRMs have come off in the last few weeks and therefore the refining segment for the better part of the second quarter and the third quarter, will stay at these levels and can be under some sort of pressure. But we all know that Reliance has access to multiple feedstocks and even if Singapore GRMs have corrected to around $6.5, an outperformance of $2 to $3 to say the least can be expected from Reliance.

The retail part of the businesses are holding up right well. We have already seen Jio do reasonably well in the past quarter, Reliance Retail with the opening up of new stores and the expectations in terms of more leverage kicking in as the festive season comes around in the next few weeks, the next couple of quarters should be good from the retail side of the business as well.

When it comes to the oil and gas part, that part of the business is showing significant signs of improvement and therefore, the number should be reasonably okay for Reliance as we head into the second as well as the third quarter with all the assumptions at play. Anybody holding onto Reliance can definitely hold.

The other space that I want to discuss with you is also IT. Of course, from tomorrow, we will get the initial data set. Tomorrow will be Accenture and it will come out with its FY24 guidance, so that will kind of set the tone for what is happening to the client spends globally. But a Morgan Stanley note today said that Q2 is going to be a bit of a weak quarter. The debate is whether FY25 will see double-digit growth returning or not?
We are treading exactly the middle line as we speak. What is really transpiring is how you divide this space into the largecap and the midcap universe. And the midcap universe has done phenomenally well. Even in the previous quarter, when the largecaps have shown significant signs of consolidation and to a certain extent some element of profit booking or deterioration in price as well, midcaps have probably held up for two or three reasons.

One, the commentary surrounding pricing, the commentary surrounding order wins remains extremely strong because the targeted bucketed list that they probably have between a million dollars to five million and to ten million for midcap IT companies those order wins and those transformational deals when it comes to AI and the associated space is there itself still continues at a rapid and a very good pace.

The other space, ER&D, where a lot of companies like a KPIT, Tata Elxsi, Sonata have done well and continue to do well. The rapid acceleration in spending by global as well as domestic OEMs when it comes to ER&D expenditure and the building up of new products/platforms, that part of the business should continue holding on with reasonable amount of margins.

The third part is in terms of margin profile itself, the margins should hold out. A lot of wage payments increments have probably happened in Q1 and they should stabilise in Q2 and as costs stabilise moving forward, probably in currency terms, midcap IT outperformance might continue.

One might very well argue valuations are through the roof, but the momentum can continue. Does that make a case for largecap IT investing as well? My own sense is that a lot will depend on what guidance Accenture gives out. Valuations definitely are better off compared to the midcap players at this juncture.

The kind of deal wins that have got announced to a large extent expected in terms of what they have probably given out in terms of guidance for the whole year itself and therefore, the typically strong quarters, Q2, Q3 and Q4 where I think a lot of action will happen in terms of order determination, depends on how the US and the European economies probably shape up.

So, remain very cautious in terms of taking positions on midcap IT. If you are holding, the momentum can continue. Largecap seems to be a better place from a valuation perspective, but one needs to be selective here and can have something like an HCL Tech , Tech Mahindra in your portfolio.

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“We are hoping that 2024 will be a breakout year for India in terms of flows with more tailwinds than headwinds,” says Harendra Kumar , Managing Director, Elara Securities India.

In an interview with ETMarkets, Kumar said: “There is always some tactical money that finds its way in/out of India during some macro headwinds. There is more money waiting to come in, than to go out” Edited excerpts:

After hitting 20,200 on the Nifty50, the market is going through some healthy consolidation. In terms of global overhang , we have the US Fed outlook , a rise in Dollar index, crude, and recent Canada comments. Have we made a top?
The Nifty was around 18500 in Oct 2021, and it has taken us two years to reclaim the top – so it is hardly a euphoric event, except that it is a headline moment.

Ambiguity on the course of the global economy is clearly weighing on a run-away rally.

2024 will hold more answers as the haze over US recession, inflation and India’s election clears and outcomes give more confirmatory signals.

Both the yields and markets cannot stay at an elevated level for too long. Either one will break down. Given that the Fed is resolute in its stand, do you think it could be the markets that break down first?
Indian largecaps have hardly rallied, so price damage at the headline will be minimal. The worst-case scenario will be that it could be a prolonged time correction.

In fact, we are hoping that 2024 will be a breakout year for India in terms of flows with more tailwinds than headwinds.

The September quarter is almost over. What are your expectations from India Inc. in Q2?
The key assessment of the direction of the market will come from banks and the Tech sector. Commentary of the tech sector is much awaited – whether it will get worse before it gets better, or this is the trough quarter.

For financials, last quarter was mixed. The behaviour of numbers was not secular which halted the run of the bank Nifty.

Given their outsized bets on some of the large private banks – any disappointments on that count will hurt the market rally.

India-Canada standoff – do you think if things escalate it will impact equity markets?
We have a more pronounced border issue with China – but trade has not suffered. It is very difficult to replace supply chains and trade partners.

The trade between India and Canada is fairly balanced and unlikely to alter much. The same will hold true for long-term investments that we attract from overseas.

How are you looking at small & midcaps – do you think that the space is looking overheated?
The rally has been exponential in some allied sectors like Power, Railways, Defence etc. If one has an opportunistic outlook to chase the rally in these names at this stage, it can be fatal.

The broader rally in mid-and small caps is in no way over and will be sustained. In the medium term, this strategy will give better outcomes than being heavy on the large caps.

What is your view on crude oil? It has rallied by about 10% in about a month.
The top was made at the outset of the Russia – Ukraine war. Global macro conditions are unlikely to fan a rally in crude prices beyond those levels.

FIIs have been busy pulling out money from Indian markets – nearly 14000 cr so far till 20 September. This is the second month of the selloff? Is it regular profit-taking, or the money is moving into debt?
There is always some tactical money that finds its way in/out of India during some macro headwinds. There is more money waiting to come in than to go out. We are sanguine on that count.

What is your call on the new wave of IPOs hitting D-St almost every week? Any company worth looking at – although we have seen the retail exuberance that we saw during Paytm, Nykaa has come down.
These are good tidings for the market. We need fresh paper to absorb the gush of retail money that we are seeing in domestic mutual funds.

It deepens the market and creates more options for asset managers. In this round, there is virtually no exuberance and investors have been more discerning.

How do we stack against the peers in terms of valuations?
India will always look expensive on a relative basis given our business profile of index heavyweights. We have monopolies and duopolies in many sectors with high market share and strong return ratios.

China is going to find it difficult to regain lost favour and that money must find a new home.

Where is smart money moving?
We are yet to see strong institutional money coming into the markets. If at all we are seeing ’smart retail’ money setting new valuation benchmarks and defining the direction of the small-cap index.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)

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Nifty ended 193 points lower on the monthly expiry day on Thursday to form a long bear candle on the daily chart.

Nifty has broken below the crucial weekly support of 10-week EMA at 19,560 levels, which has been offering support to the market in the last few months and resulted in a decent upside bounce from the said support in the past. Having declined below this support this time, the market could slide down to its next support of 20-week EMA, currently placed around 19,230 levels. Immediate resistance is at 19,700 levels, said Nagaraj Shetti of HDFC Securities.

The daily and hourly momentum indicators have a negative crossover which is a sell signal.

What should traders do? Here’s what analysts said:

Jatin Gedia, Sharekhan by BNP Paribas
On the daily charts, we can observe that the Nifty closed below the 19,600 – 19,550 zone where multiple supports were placed. This is a sign of further weakness. On the way down it can slip further towards 19,500 – 19,440 which is the 78.6% Fibonacci retracement level of the rise from 19,224 – 20,222. In terms of levels, 19,500 – 19,440 is the crucial support zone, while 19,625 – 19,650 shall act as an immediate hurdle zone.

Rupak De, Senior Technical analyst at LKP Securities
Nifty experienced a significant correction as it was unable to maintain levels above 19,750. In the daily timeframe, the most recent candle has engulfed the bodies of the preceding few days’ candles, which suggests a negative sentiment. The prevailing sentiment continues to favor selling during rallies. Looking ahead, the Nifty may decline towards 19,250, with immediate support situated at 19,450. Resistance is positioned at the higher end at 19,600.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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NEW DELHI: “If you control the center, you can control the game.” Well, we are not discussing an opening strategy in chess , but a trading strategy in the stock market!

Whether its trading or investing, market participants often draw inspiration from different subjects, sometimes completely unrelated to the world of stocks. For Nikhil Kamath , co-founder and Chief Investment Officer at Zerodha and True Beacon, chess was a passion since his childhood!

“When you are playing chess, you are trying to control the center, develop your pieces, castle as fast as possible. Those are basic principles of the game. The same kind of rules also apply to trading, for example, in how you place a stop loss, how you handle leverage,” Kamath told ETMarkets in an interview.

The stockbroker and money manager played chess as a regular sport as a teenager and even competed at the national level, but had to give up that passion after he dropped out of school at the age of 17 to start stock trading, as the entrepreneurial pursuit took away his free time.

“You have to be fairly structured in chess. The same rules apply to trading as well. Chess taught me the importance of following a structure, beyond which you can be creative,” says the 31-year-old Bengaluru-based billionaire.

After the success of Zerodha, India’s largest stock broking platform that he started with his brother Nithin Kamath in 2010, Nikhil started a hedge fund – True Beacon – two years ago to manage money for HNIs and ultra-HNIs.

Just like how Zerodha disrupted the stock broking industry with its zero-fee model for equity delivery and a nominal fee of Rs 20 for intraday and F&O trades, True Beacon is trying to be a gamechanger in the AIF industry by being cheap and efficient.

“Our AUM is growing at a rate of 15 per cent month-on-month. People like the fact that we are a lot more transparent and cheaper than our peers. We don’t have management fees and entry or exit loads,” Kamath says.

His fund aims to beat Nifty by 6 per cent on a multi-year basis. “We have been able to navigate these markets better than most fund managers. Since the start of March, 2020, till end of February, 2021, our fund has outperformed Nifty by 22.5 per cent and generated a cumulative return of 44 per cent. This, we have been able to do by being smart about how to hedge our portfolio and manage the downside risks for our clients,” he said.

On his outlook for the market, Kamath said he would not recommend investors to build too large a portfolio without putting sufficient hedges in place, given the fact that Nifty is still trading at higher-than-average multiples.

True Beacon is busy making allocations in largecap IT and pharma stocks. “For a market that is overpriced, I think these stock do a good job of providing a safe place to hide,” he said.

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