22 Nov 2022

Outlook

  • 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.

 

Key risks 

  • 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.

 

Tailwinds

  • 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.

The information contained herein is extracted from KMAMC internal research/different public sources. All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time of publication. This is for the information of the person to whom it is provided without any liability whatsoever on the part of Kotak Mahindra Asset Management Co Ltd or any associated companies or any employee thereof. Investors may consult their financial experts before making any investment decision.

The article includes statements/opinions which contain words or phrases such as "will", "believe", "expect" and similar expressions or variations of such expressions, that are forward looking statements. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with the statements mentioned with respect to but not limited to exposure to market risks, general and exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. Past performance may or may not be sustained in future.

This is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of it, in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this material are required to inform themselves about, and to observe, any such restrictions. The sector(s) referred, should not be construed as any kind of recommendation and are for general information only.

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© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.