BREXIT to affect these IT stocks negatively?
DSIJ Intelligence / 20 Jun 2016
Experts fear the BREXIT will lead the UK economy into recession and there will be a lot of disturbance in economy which will create several hurdles for various companies across the globe doing business in UK. Indian IT sector could well be one such sector, which may not like BREXIT to happen and may well be counting its losses if at all BREXIT happens.
June 23 promises to be an eventful day and could well be one of the most awaited days of recent times as far as world markets are concerned. The Britons will decide if UK should stay or leave EU trade bloc by voting on June 23.Experts fear the BREXIT will lead the UK economy into recession and there will be a lot of disturbance in economy which will create several hurdles for various companies across the globe doing business in UK.
Indian IT sector could well be one such sector, which may not like BREXIT to happen and may well be counting its losses if at all BREXIT happens.
According to Merrill Lynch Global Research the revenue gain from UK for various IT companies is significant. Interestingly Infosys has the least exposure to UK with only 6.6 per cent of total revenues being derived from UK markets; and Tata Consultancy Services has the highest exposure to UK markets with almost 14 per cent of total revenues coming from UK markets.
According to the research report Wipro and Tech Mahindra have at-least 12 per cent exposure each to the UK markets, and HCL Tech derives at least 13 per cent of its revenues from UK markets.
According to the research report several of the big IT companies have not hedged their receivables in GBP (Great Britain Pound) and the exit vote may lead to GBP depreciating abnormally. Infosys could see a negative 3.1 per cent, Wipro negative 5.5 per cent and TCS may see negative 5.7 per cent impact on FY17 EPS if BREXIT happens. For Tech Mahindra the FY17 EPS may erode by 7.7 per cent as per the research report.
The million dollar question is whether BREXIT will happen and there is increasing likelihood that BREXIT may not happen with global markets cheering the shift in trend towards "remain". Broader markets are trading volatile even as market digests Raghuram Rajan's exit and weak rupee with Sensex trading at 26872 levels, up by 246 points at 3.10 pm on Monday.
IT stocks are trading in the green as TCS contributes 27 points and Infosys contributes 48 points to the Sensex.
Global markets are rallying with mellowed BREXIT fears and Dow futures indicating a firm opening in US markets.
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