Rupee depreciation is definitely benefiting the IT sector in the short term, said V Balakrishnan, Board member of Infosys. Balakrishnan told ET Now that if the government is able to step up reforms, the rupee will stabilise. "Raghuram Rajan spoke in the right direction, if measures are implemented, rupee should find stability," he told ET Now.
While concerns on outflows will put pressure on the currency, Balakrishnan is of the opinion that both short & longer term measures are needed to reduce foreign exchange market volatility. "There is a need to attract a lot of capital in the short term to help rupee; sluggish growth, high inflation are weighing on rupee," he said.
Asked about the global economic growth, Balakrishnan said that the world is recovering. "Demand is picking up on the back of US, Europe recovery," he said.
However, Balakrishnan refused to comment on the buzz that he will take over as the CEO of InfosysBSE -3.25 % after Shibulal retires. Earlier this week, ET reported that V Balakrishnan, who until three months ago was looking like a fading star at Infosys, has seen his fortunes change so rapidly that he could soon be the CEO of India's second largest software company.
According to people aware of the thinking in the top echelons of Infosys, a confluence of events, including the decision of Americas headAshok Vemuri to leave Infosys for iGate, make Balakrishnan's ascent to the role of CEO all but certain. "Internally, the sense is that the decision has been made," said a source.
Most of the IT stocks are witnessing sharp upswing in the past couple of month on the back of steep rise in local currency and improving global economy, say analysts. Defensive names such as IT and pharmaceutical companies gets support from depreciating rupee and act as a good hedge against falling markets, they say.
Being dependent more on the global economy, technology sector is less affected by the slowdown in Indian economy which has slipped to 4.4 per cent. Several foreign brokerages including CLSA, Nomura, JP Morgan, and HSBC have cut growth estimates for India by up to 2% due to tightening financial conditions, slowing industrial production and increasing economic uncertainty.
Industry body The National Association of Software and Services Companies (Nasscom) expectsIndian IT industry to clock in growth of 12-14 per cent in revenues in dollar terms to $85 -87 billion in the fiscal year ending 2014.
With the addition of new clients, IT firms are seeing good deal pipelines which testify the belief that the improving health of the developed economies at the first point would lead to higher spending on the technology.