Infosys may see revival in growth, Analysts

IT indices once again failed to earn return in 2012 largely on account of dull show by sector stalwarts, Infosys and Wipro and tepid return by Tata Consultancy Services. Following a sharp fall of 18% in 2011, the ET Infotech index lost 0.3% in 2012. With relatively lower valuations and expectation of sustained traction in outsourcing due to the need to control costs across Western economies and stable trend in billing rates, 2013 may very well be a comeback year for the index.
Valuations of the IT sector indices have fallen over the last few years tracking cautious commentary by some of the major IT players and delayed recovery in big outsourcing markets in the US and Europe. The ET Infotech index trades at a trailing price-earning ratio of 15.8, lower than the historical mark over 20.

In 2013, some market observers believe that Indian companies will continue to benefit from the fresh impetus to outsourcing as companies in the West keep focusing on cost rationalisation without sacrificing operating efficiency. According to global technology research firm Gartner, sectors including banking, financial services, and insurance (BFSI), transportation, and communications media will show better growth in their IT budgets in 2013 ranging between 3-5% from the year ago.

Analysts believe that Infosys could be able to report a revival in growth rate following the changes in management and regained focus on verticals and platforms. With a fall of 17%, the company's stock was the worst performer in 2012 among the top five IT companies that are publicly listed in India.

HCL Technologies, which was the best performer among the top five with 62% gain , is expected to reap benefits of strategy to focus on large deals. It is expected to retain is lead in terms of revenue and profit growth over peers in 2013.