Tech growth woes pose risk to Dalal Street's sizzling rally

economictimes.indiatimes.com:

As investors await these results this week, a gauge of Indian tech shares has fallen for three straight weeks after rallying for the most part in 2023. The broader benchmark NSE Nifty 50 Index was also in the red so far this year after gaining 20% in 2023.

India took the world by storm last year, powered by its fast economic growth, a growing middle class and rising manufacturing prowess as China falls out of favor. Its stock market value reached more than $4 trillion for the first time as global investors poured more than $20 billion into its equities on a net basis in 2023, most in three years.

But there are signs that earnings may not grow fast enough to sustain the rally.

“There’s a lot of positivity that is being factored in but earnings growth in 2024 should moderate compared to last year due to margins compressing even as revenue growth picks up,” said Rajat Agarwal, Asia equity strategist at Societe Generale. “It does not look like that this is going to be a year of very strong returns for the market.”


Overall, profit estimates for Indian companies have been moderating, with growth now seen at 17.7% for this year, compared with about 20% just a month ago, data compiled by Bloomberg Intelligence show.

Companies covered by Jefferies Financial Group Inc. in India will likely report 14% year-over-year growth in this earnings season, slower than a 38% jump in the previous quarter, the broker said.

Software giant Infosys Ltd.

is set to report its slowest sales growth in more than 14 years as key clients continue to restrict spending on technology while uncertainty in global economy persists. Tata Consultancy Services Ltd., Asia’s largest software services exporter, is seen posting revenue growth of 2.6%, the