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MOSL: MOrning India (23/August/22): 1. Technology (Quarterly industry commentary: Fewer pockets of weakness); 2. Jubilant Foodworks (Annual Report Update); 3. Specialty Chemicals Conference 3.0 (Key takeaways)

MOrning India (23/August/22): 1. Technology (Quarterly industry commentary: Fewer pockets of weakness); 2. Jubilant Foodworks (Annual Report Update); 3. Specialty Chemicals Conference 3.0 (Key takeaways); 4. Metals Weekl

Today’s top research idea

Technology: Quarterly industry commentary: Fewer pockets of weakness

• Macroeconomic weakness due to rising interest rates, elevated inflation, and the resultant slowdown in corporate growth has led to heightened concerns on demand for IT Services. We analyzed 40 companies across seven key industries to attain a sense of demand environment.
• The commentaries suggested limited cutbacks. Overall, the commentaries were mixed, with industries such as BFSI, Automotive, Technology and O&G remaining positive on their technology spends, while others like Retail, parts of Manufacturing, and Telecom suggesting adverse impact on their opex budgets.
• Despite the weak macro, the longer term demand remains intact as businesses continue to rely on technology, both for driving incremental revenue and optimizing costs. Macro concerns have already been factored in the valuations. We remain positive on account of sustained long-term demand. We continue to like INFO, HCLT, and TCS in Tier I IT and LTTS and MPHL among Tier II players.

• Piping hot news

  Infosys reduces avg variable pay to 70% for Q1 amid margin squeeze: Report

  India's second largest IT services company Infosys has scaled back the average variable payout of employees to about 70 per cent for the June quarter amid margin squeeze and high employee costs, according to sources. Recently, Wipro held back the variable pay of employees mainly due to pressure on margins, inefficiency in its talent supply chain and investment in technology. Larger rival Tata Consultancy Sevices has reportedly delayed quarterly variable compensation payout for some employees by a month.