<p>A Reuters poll of brokerages estimates profits at Patni Computer Systems to fall 2 per cent, Mphasis Ltd to rise by 13 per cent and Tech Mahindra up by 18 per cent.<br /><br />“The recovery will be US-led for midcap IT firms but the bigger worry is margins. Margin pressure will be more for the mid-caps than the large-caps,” said an analyst with Emkay Global.<br /><br />Indian software companies are benefitting after services spend in the US, the largest market for the sector, is gaining traction post the global economic downturn.<br />However, operational challenges such as high attrition and wage inflation are likely to put pressure on margins, ICICI Direct said in a note.<br /><br />“Companies have given an average wage hike of 12-14 per cent offshore and 2-3 per cent onsite to be competitive in an improving demand scenario,” an analyst with Mumbai-based brokerage said. Analysts expect margins of firms like Patni, Mindtree, Mphasis, HCL Technologies and Tech Mahindrato dip by 80-117 basis points during the quarter.<br /><br />Companies like Tech Mahindra, HCL Tech and Mastek, with huge exposure to the UK and Europe, will be impacted as the dollar rose 7 per cent against the euro and 3.5 per cent against the pound in the quarter, analysts said. Europe is the second-biggest market for the sector after the United States.<br /><br />Infosys Technologies, posted an unexpected decline in quarterly profit, and gave a muted forecast on concerns a weak European economy could curb new orders and dampen a recovery for India’s outsourcing sector. <br /><br />Tata Consultancy Services, said it saw strong demand after posting a better-than-expected 21 per cent rise in quarterly profit, but was cautious about economic conditions in Europe.<br /><br />Analysts agreed that there would be more clarity about the impact of the euro zone crisis on the performance of mid-cap IT firms over the next 2-3 quarters.<br /></p>
<p>A Reuters poll of brokerages estimates profits at Patni Computer Systems to fall 2 per cent, Mphasis Ltd to rise by 13 per cent and Tech Mahindra up by 18 per cent.<br /><br />“The recovery will be US-led for midcap IT firms but the bigger worry is margins. Margin pressure will be more for the mid-caps than the large-caps,” said an analyst with Emkay Global.<br /><br />Indian software companies are benefitting after services spend in the US, the largest market for the sector, is gaining traction post the global economic downturn.<br />However, operational challenges such as high attrition and wage inflation are likely to put pressure on margins, ICICI Direct said in a note.<br /><br />“Companies have given an average wage hike of 12-14 per cent offshore and 2-3 per cent onsite to be competitive in an improving demand scenario,” an analyst with Mumbai-based brokerage said. Analysts expect margins of firms like Patni, Mindtree, Mphasis, HCL Technologies and Tech Mahindrato dip by 80-117 basis points during the quarter.<br /><br />Companies like Tech Mahindra, HCL Tech and Mastek, with huge exposure to the UK and Europe, will be impacted as the dollar rose 7 per cent against the euro and 3.5 per cent against the pound in the quarter, analysts said. Europe is the second-biggest market for the sector after the United States.<br /><br />Infosys Technologies, posted an unexpected decline in quarterly profit, and gave a muted forecast on concerns a weak European economy could curb new orders and dampen a recovery for India’s outsourcing sector. <br /><br />Tata Consultancy Services, said it saw strong demand after posting a better-than-expected 21 per cent rise in quarterly profit, but was cautious about economic conditions in Europe.<br /><br />Analysts agreed that there would be more clarity about the impact of the euro zone crisis on the performance of mid-cap IT firms over the next 2-3 quarters.<br /></p>