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Indian IT sector future prospect
I have maintained it from beginning that indian It sector would face severe crisis in future,and that came true.Being an Economist and Capital market professional ,I look at this from a different angle unlike others.
let me first take case of major players of IT industry ,Infosys,wipro,satyam and TCS.almost all of them dependent on foreign market,like Infosys its more than 65 percent of revenue comes from north america,similar case with others too. so any slow down in global economy bound to have an impact on them.let me go first to year 2007,when IT sector faced severe pressure on their margin due to strengthening of Rupee vs Dollar,as it not only affected their earning guidance in dollar terms but also they faced heavy losses in deriative forex market.it was shown in their stock prices,when stock market was making new highs,IT firms were facing selling on its stocks,ratings for IT stocks went down,no one was recommending IT stocks for investment.
then came US economy slowdown,worst since 1930,and it spread to Europe ,and started spreading down to others.
so long as US economy does not recover ,there is little hope for future growth of indian IT sector.US economy went down in recession in 2006-2007,but it was not noticed then,as euphoria in US capital market has suppressed this fear,but problem remained there,none took care of it,even no one was ready to buy this theory of US slowdown,when bubble of euphoria bursted,then people came to know that how dear it was to neglect the problem of slowdown in preliminary phase.This affected not only Financial sectors in US but others too get affected,IT is not an exception.
though Us govt. trying to cope this problem through bailout and rate cut,but that is not sufficient,by adopting such measures ,they can exercise some damage control,but it cant put US economy back on track.In my view it takes atleast one year.
New President will assume office next year,and any concrete step take by him will take long time to show desired result.
It does mean that Indian IT industry will have to face this crisis for long.though some IT Giants are working out others way to get out of this crisis,but these all are time taking.Meanwhile some IT companies might go for some adjustment on their balance sheet to show their confidence,which might reflect in their quarterly results,but all this will be face saving exercise.