Reliance Money negative on IT sector

Reliance Money continues to remain negative on the Indian IT sector. Indian IT sector is expected to face rough Industry headwinds and the research firm believes 2009 is going to be tougher for the Indian IT players.

Reliance Money’s report:

We attended the 4Q conference call of TPI on the Global, European and Asia Pacific Outsourcing Market conducted in January 2009. The performance of global outsourcing industry deteriorated with the total contract value awarded in H208 dropping to a 10 year low to USD 39.1 billion, decline of 22.1% from the TCV of USD 50.3 billion H207, marked by fewer mega deals (>USD 1 billion) and a major downtrend in US and EMEA. Better performance of Asia Pacific and gain in market share by Indian IT providers were positive surprises. The downturn in global outsourcing is comparable to the decline in the 2001 recession; however the impact is expected to last longer. The recession and the India based challenges will affect TCV in 1H09; hence the downturn is expected to continue.

Indian IT sector is expected to face rough Industry headwinds and we believe 2009 is going to be tougher for the Indian IT players, with overall lower demand growth coupled with severe pricing pressure likely to depress the reported numbers in the coming quarters. We continue to remain negative on the sector.

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