22 Nov 2022
- Now that the COVID-19-led push for digital transformation is waning off, both growth and deal win expectations seem to be disappointing.
- Companies have turned very cautious on the demand outlook given the macro challenges in western economies.
- Attrition remains elevated even though compensation expectations are cooling off.
- The unavailability of lateral talent on site is leading to elevated subcontracting charges.
- Discretionary costs, such as travel, facility expenses etc. are an additional margin headwind.
- Earnings expectations look elevated from a growth standpoint and could lead to earnings cuts.
- Depreciation of the rupee against the dollar may not necessarily be beneficial given that the dollar is strengthening against currencies like the Euro and pound.
- Lack of large deals, which leads to lower predictability in the portfolio.
- Continued demand for cloud migration/optimization deals.
- Possibility of offshoring deals because of the inflationary environment in developed markets.
(House View aims to regularly provide readers with Kotak Mahindra Mutual Fund’s latest updates on various sectors)
The views discussed here are as on end of Sep 2022.
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