Expect further downgrades to earning expectations in IT sector: Sandip Sabharwal

economictimes.indiatimes.com:

Sandip Sabharwal, asksandipsabharwal.com, says “there will be further downsides to earning expectations in IT because the earning expectations of analysts are still too high for this sector. We need to monitor this sector as to when we want to buy into it. Right now, I do not think it is the time to buy into it.

Next quarter when these companies talk about their guidance, there could be further cuts.”On a stand-alone basis, Cummis has reported a profit growth of 59% year on year; the revenue has gone up by 31%, domestic sales is higher by 43% but the street is still calling it in-line because probably that was what they were expecting. What do you think of the valuation of the stock in terms of what the move can be given that last quarter also we had seen very volatile moves post the earnings when the company had decided not to give any guidance?This time there is no case for big volatility because results are more or less in line with expectations. However, like many other industrial stocks, especially pure capital goods companies, the run-up has been very significant.

After such a significant run-up, even to sustain, the stocks need good results. My guess is many of these companies which have moved up sharply which include ABB, Siemens, Cummins, etc, need to go through a phase of consolidation and subsequently they could move up further. But in the near term, it is tough to justify significant up moves given the valuations of these stocks.The newspapers are reporting that the Hamied family is selling their entire Cipla stake. It is a family-owned business which is shifting from one generation to another generation and it is a company which commands a lot of respect. But if promoters are looking at exiting, that means