🗽 Modi’s US visit is more critical than you think.
💻 TCS had a bribes-for-jobs scandal.
🏦 Indian IT stocks on the verge of slowdown?
Read Time: 4 mins
1. The Modi-Elon Meetup
Focus on Strengthening Ties
Prime Minister Narendra Modi arrived in Washington DC on Sunday for a four-day visit to the United States. The visit is expected to focus on strengthening bilateral ties between the two countries, especially in the areas of trade, investment, and security. He also met Elon Musk, who gave heaps of praise on Modi’s leadership, and says Tesla will be in India soon.
Challenges and Opportunities
Modi's visit comes at a time when the US-India relationship is facing some challenges. The two countries have different views on a number of issues, including the Russia-Ukraine war and China's rise in the Indo-Pacific region. Modi's visit is seen as an opportunity to strengthen ties and address these challenges.
Our Opinion: The US, in need of a strong ally in this part of the world, sees a natural long-term partner in India and recent bilateral deals including sharing of sensitive technology and increasing commitments by American Companies towards investing in India clearly signal a prosperous and a healthy relationship.
2. The TCS Scandal
TCS Sacks 4 Executives for Bribery
TCS, India's largest IT company, has sacked 4 executives for allegedly accepting bribes from staffing firms in exchange for hiring candidates. The scandal has rocked the company, which has been accused of compromising the recruitment process.
Company Probes Further
TCS has set up a team to investigate the allegations, and it is not yet clear how many people were involved in the scheme or how much money was exchanged, to be able to take "appropriate action" against anyone found to be involved.
Our Opinion: Ever since the top management reshuffle at TCS at the start of 2023, with the exit of former CEO Rajesh Gopinathan, the IT bellwether has come under intense criticism and scrutiny by external stakeholders. The board is tightening its ship by reviewing internal practices which is a part of the company’s course correction process.
3. Indian IT Stocks Fall
Accenture Trims FY23 Revenue Guidance
Accenture has trimmed its fiscal year 2023 revenue guidance, citing a slowdown in demand. The company now expects revenue growth of 8-9% in FY23, down from its previous guidance of 8-10%. This has led to a sell-off in Indian IT stocks, as investors worry about the impact of the slowdown on the sector.
Analysts Downgrade Indian IT Stocks
Several analysts have downgraded Indian IT stocks following Accenture's guidance cut. Nomura India has downgraded Infosys, Wipro, and TCS to "reduce" from "neutral", while Morgan Stanley has downgraded TCS to "underweight" from "equal-weight". The analysts cited the slowdown in demand, as well as rising inflation and geopolitical risks, as reasons for the downgrades.
Our Opinion: CNXIT has been one of the worst performing sectors in the last 1 year, underperforming Nifty 50 by as much as 16%. Indian IT Companies have significant exposure to US & European regions (making up as much as 80% of their overall revenues) which have been facing challenging economic conditions and demand slowdown from end customers, notably US Banking and Financial companies.