Indian tech shares rise as global majors spur spending hopes

* Oracle, Accenture results add to optimism

* Analysts see FY12 revenue growth of 20-25 pct for top
three Indian IT cos

* Expectations of pricing uptick further boost sentiment

By Ami Shah and Bharghavi Nagaraju

MUMBAI/BANGALORE, March 31 (Reuters) – Shares of India’s
leading IT firms are rallying on hopes that upbeat results and
outlooks last week from global technology majors Oracle Corp
and Accenture bode well for a resurgence in
tech spending.

The Indian IT sector index has jumped nearly 8
percent since results from the two U.S.-based giants fuelled
hopes of a global resurgence in technology spending and added to
expectations for a pickup in pricing.

“Overall, it is a positive signal for the Indian IT sector,”
said Rohit Anand, senior analyst with PINC Research, who expects
the dollar revenue of India’s top three IT firms to grow in the
range of 25-30 percent in the year ending March 2012.

“New license sales have risen (at Oracle). That means people
are looking at more discretionary spending, they are thinking of
more than just merely cost cutting initiatives,” he added.

Analysts estimate revenue growth at the top three — Tata
Consultancy Services Ltd , Infosys Technologies Ltd
and Wipro Ltd — will rise by roughly 20-25
percent in the fiscal year ending March 2012, faster than the
overall sector, driven by rising demand and price hikes.

“A continued strong uptake in IT services demand due to
improving economic growth in the U.S. benefits Indian IT
companies like TCS, Infosys and Wipro,” said Taina Erajuuri,
fund manager with Helsinki-based FIM Asset Management.

“Pricing is expected (to) pick up this year, which augurs
well for Indian IT companies,” she said.

This week, TCS Chief Executive N. Chandrasekaran said he
expects to “definitely” see an uptick in pricing in the fiscal
year that starts April 1, after prices rose in the
October-December period for the first time in six quarters.

Last week, IT outsourcing and consulting firm Accenture
raised its outlook for the full year, while Oracle forecast a 4
to 14 percent rise in new software sales for the fiscal fourth
quarter after reporting a 29 percent jump in new software
license sales for its third quarter. [ID:nN24180187]

‘RICHLY VALUED’

According to StarMine SmartEstimates, Infosys, TCS
and Wipro trade at 21.2, 21.7 and 18.9 times 12-month forward
earnings respectively, a tad higher than the five-year average,
analysts said.

By comparison, global rivals Accenture and Capgemini
trade at 15.5 and 15.1 times forward earnings
respectively.

“(Indian) IT stocks are richly valued, but they are
well-positioned to command these premium valuations, due to the
history of performance deliveries,” said Rakesh Rawal, head of
private wealth management at brokerage Anand Rathi.

Rawal, who manages $1 billion of funds for wealthy
individuals, holds the top three IT stocks for his clients.

Moves by Infosys and TCS to focus on higher value work such
as consulting are also positive, investors said.

According to StarMine, out of 46 analysts tracking
Infosys, 25 had a strong buy or buy with 5 recommending a sell
or a strong sell. The rest had a hold.

The sector index is down 5.9 percent since the
start of the year to March 30, in line with the larger market
. TCS, Infosys and Wipro shed 1.2 percent, nearly 8
percent, and 3.4 percent respectively.

TCS shares are just about 40 rupees away from their record
high of 1,221 rupees, scaled in January.

Investors will watch out for the guidance from
Indian technology companies for the next fiscal year when
Infosys kicks off earnings season on April 15.

Brokerage Motilal Oswal issued a report this week on Infosys
reiterating its buy rating and a price target of 3,664 rupees —
or nearly 16 percent above Wednesday’s closing price.

(Editing by Jui Chakravorty)

Indian tech shares rise as global majors spur spending hopes