Brushing off the seasonality factor, HCLTech is expected to report strong earnings for the December quarter, while Wipro may continue to disappoint the market.
If we look at the performance of HCLTech and Wipro stocks in the last quarter, then the former has rallied nearly 19% and the latter about 16%.
Entering into the new year, HCLTech shares are still holding on to gains, whereas the frenzy fizzled out in Wipro as the stock has corrected about 5% so far this month.
Whether Wipro shares will correct further or HCLTech shares sustain the upward momentum depends upon their earnings scorecard.
What to expect from HCLTech?
The IT major is seen reporting a nearly 5% sequential rise in consolidated revenue to Rs 27,959.40 crore, and net profit is expected to increase by nearly 7% to Rs 4,085 crore, according to the average of estimates given by 11 brokerage firms.
In constant currency terms, analysts expect HCLTech’s revenue to grow 4.6% sequentially in the quarter gone by.Also Read | HCL Tech Q3 Live Updates
Analysts widely expect HCLTech to retain its revenue growth and margin guidance for FY24.
“We would be looking out for comments on recovery of ERS demand after sharp decline, updates on large deals won in past quarters, and an update on the acquisition strategy and capital allocation policy,” said Dhruv Mudaraddi, Research Analyst at Stoxbox.
Also Read | HCLTech Q3 Preview: Revenue to grow better than peers
What to expect from Wipro?
Hit by higher than usual furloughs and weak discretionary demand environment, Wipro is likely to see a 2.5-3.2% sequential decline in constant currency revenue growth in the IT services business.
“We expect Wipro’s Q3FY24 revenue to decline in low single digits QoQ due to a lower services income owing to weakness in BFSI and Hi-tech verticals, along with challenges in the consulting business,” Mudaraddi said.
Analysts expect Wipro to guide for -1% to +1% sequential growth in constant currency revenue for the March quarter.
Also Read | Wipro Q3 Results Live Updates
Analysts will keep an eye on the size and nature of large deals in the quarter, margin levers,
any signs of stabilization in discretionary project ramp-downs and the impact of attrition among senior leadership.
Also Read | Wipro Q3 Preview: Sales may fall on weak demand environment
Stock Talk
HCLTech shares are trading near their all-time high level, whereas Wipro is trading 38% below its life-time high, which was registered in January 2022.
In the recovery phase since April 2023, HCLTech has demonstrated an impressive 46% recovery, whereas Wipro has experienced a 27% upswing, said Sudeep Shah, head of technical and derivatives research at SBI Securities.
“This not only underscores HCLTech’s substantial outperformance compared to Nifty IT, but also positions it as a frontrunner among its peers like Infosys, TCS, and Wipro,” Shah said, adding that HCLTech is poised to sustain its superior performance in the short term.
From a short-term perspective, as long as HCLTech remains above Rs 1,430-1,440 zone, there’s potential for an upward move towards Rs 1,530-1,540 in the coming sessions.
Notable put writing was observed at the Rs 1480-1460-1450 strikes, while there is evident aggressive call writing at 1500 strike, which suggests a potential trading range of Rs 1,440-1,540 for the stock, Shah said.
Meanwhile, ahead of the earnings, Wipro’s price action reflects a negative momentum.
Despite multiple attempts, the stock has struggled to surpass and sustain above the Rs 480-490 zone.
If the 200-day moving average (DMA), situated within the Rs 432-435 range, is breached, there is a potential downside risk for the stock, with a likely retreat toward Rs 415-410 levels, Shah said.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)