Will Infy bring cheer back to IT sector?

New Delhi: Infosys is coming out with its results on July 12 (Wednesday).

Analysts believe that Infosys' earnings growth at 30 per cent for Q1FY07 over the same quarter last year and sequential growth in profits at 4-7 per cent is likely to bring the IT sector back on the radar of investors.

The IT sector has remained a laggard in the first quarter of FY07. Against the Sensex's return of –8.3 per cent, the IT sector posted a return of –10.3 per cent.

IT major Infosys will be declaring its first quarter results on Wednesday, July 12, and analysts believe that India's second largest exporter will not disappoint.

Usually a good set of numbers from market leader Infosys is an indication of how good the other IT companies will perform, believe analysts.

According to them for Q1FY07 Infosys will post a QoQ revenue growth of 7.2-10 per cent and PAT growth of 4.5-7.1 per cent sequentially.

On the YoY basis, the same figure would translate into 30-35 per cent growth on the revenue side and 30 per cent increase in the net profits.

"At this point of time we believe that there would be at least 35-37per cent jump in sales over same quarter last year and sequential rise would be about 8.5per cent. While increase in net profits over last year would be 30per cent and sequential rise would be about 3per cent," says Deven Choksey of K R Choksey.

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"This will be in line with the market expectation," feels Choksey. At least the market will not be disappointed, he adds quickly.

The IT sector will bring back the confidence of global investors, who have been shunning India for some time now, back to the Indian markets is what Choksey think will the IT sector do for the Indian markets.

"The It sector has been an under-performer till now because other sectors had shown more promise compared to IT. But this is likely to change now as the IT sector has the potential to grow by at least 30per cent for another couple of years and that will bring the sector on the radar of global investors."

On the macro front though high interest rates, expectations of a higher inflation and concern over spiraling crude oil prices have resulted in turning negative sentiments.

The Indian markets have been tottering under the influence of global concerns on oil, interest rates, and FII inflows.

Analysts believe that the first two concerns have been factored into the current market prices and FII inflows, though negative on last Friday, have been positive in June (buys of Rs 1418 crore) and July (Rs 1034 crore) after withdrawing a huge Rs 8247 crore in May.

However, Ambareesh Baliga of Karvy Stock Broking feels that Infosys' results could spring a positive surprise at least for the IT sector and advises a hold on top line IT stocks.