India tech valuations put to the test as global headwinds put pressure on earnings

economictimes.indiatimes.com:

India’s tech sector index, which includes Infosys Ltd. and Tata Consultancy Services Ltd., rallied 12% in the three months through December, powered by a global rally in the space after a dovish pivot by the Federal Reserve. India’s tech stocks trade at about a 30% premium to the broader market. Improved sentiment aside, IT earnings remain under pressure.
“Although sentiment has improved, it has not yet been reflected in actions,” said Mukul Garg and Pritesh Thakkar, analysts at Motilal Oswal Financial Services. Analysts at Nomura expect the ongoing slowdown to weigh on discretionary tech spending into the 2025 financial year.

Firms in the sector are focused on integrating generative AI into their operations and training employees to use the tool effectively. Earnings at Samsung Electronics Co., which is set to benefit from AI chip demand this year, found support from higher shipments of DRAM chips during the quarter.

Highlights to look out for:

Tuesday:

Samsung Electronics’ (005930 KS) bit shipments for DRAM may have grown with higher average selling prices, Bloomberg Intelligence said. NAND sales probably also increased, though average selling prices remain weak. Overall, fourth-quarter revenue was probably steady, while net income fell. HSBC analysts including Ricky Seo expect slight margin pressure on smartphones from rising marketing costs and OLED. The company targets operating profit of 11.5 trillion won ($8.8 billion) in the chip business in 2024, driven by the rebound in DRAM prices and revived chip demand on AI, the Korea Economic Daily reported.

Thursday:

Tata Consultancy Services (TCS IN) is poised to report its weakest quarterly revenue growth since July-Sept. 2020 on cuts in discretionary tech