MUMBAI: A slight improvement in discretionary spending and the US economy getting stablilised may help the Indian IT companies post steady growth in earnings for the January-March quarter, analysts said.
The earnings season will start with InfosysBSE -0.64 % announcing its fourth quarter results on April 12, followed by HCL TechnologiesBSE -1.06 % on April 17.
TCSBSE -1.23 %, WiproBSE -1.13 % and other leading IT firms are yet to disclose the dates for their financial results.
"We expect companies under our coverage to report a sequential revenue growth of about 2.6 per cent, driven by volumes," Kotak Securities Head (Fundamental Research) Dipen Shah said in a preview report on the IT sector results.
While the economies of the US and European Union may take long to improve, the stimulus measures taken by them have eased concerns of defaults/bankruptcies and helped them stabilise, he said.
"There has likely been some improvement in velocity of decision making and discretionary budgets are also getting released...This may prevent demand from falling in the foreseeable future," Shah said.
Traditionally, January-March is a soft quarter for IT companies as budgets get closed and decisions are taken between February and March on the kind of discretionary, operational and capital spending.
Barclays, in a report, cited similar reasons for its optimism in the sector.
"Early closure of IT budgets, slight improvement in discretionary spending and relatively better US GDP growth are all pointing to an improving revenue trend for Indian IT services companies in FY14 and numbers for the March quarter should reflect steady growth," it said.
