IT stocks slip into the red as growth worries re-emerge over Goldman Sachs layoffs
In 2022, IT stocks have largely underperformed the broader Indian stock market on fears that a recession in the US will trigger a slowdown in revenue growth and deal wins for Indian outsourcing majors
Indian information technology stocks plummeted on September 14 as media reports of US investment banking giant Goldman Sachs laying off employees fuelled worries over the prospect of the sector.
News agency Reuters reported that Goldman Sachs was looking to trim its headcount as soon as this month amid mounting risk of recession in the US. Goldman’s resumption of the annual practice after a two-year pause raised concerns that other major US banks may follow suit, which could also mean cost cuts in segments such as tech services.
The concerns around recession heightened on Tuesday as the August inflation print in the US showed that price rise continues to dog the US central bank, which is raising interest rates at the fastest pace in over four decades.
Technology stocks in the US were sold off on Tuesday after inflation in August came in at 8.3 percent, much faster than economists’ expectations of 8.1 percent. The August inflation print has reignited fears that the US Federal Reserve will continue to raise interest rates at a faster pace, which may eventually trigger a recession in the US economy.
In 2022, IT stocks have largely underperformed the broader Indian stock market on fears that a recession in the US will trigger a slowdown in revenue growth and deal wins for Indian outsourcing majors.
The US accounts for more than 25-65 percent of revenues for most Indian information technology companies. A slowdown in growth of the US economy will likely push clients to cut back on spending on IT services or delay the completion of ongoing projects.
IT stocks had recently found some favour with investors after the commentary from their managements that they have not seen any slowdown in deal wins or cut back on spending by clients.
With the US Federal Reserve now feared to raise interest rates beyond the 4 percent mark, participants are likely expect a recession in the US in the first half of 2023.
“While the PE de-rating was led by macro risk on growth (FY24), earnings cuts were driven by margin cuts as lead-lag between growth and operating structure normalise,” said brokerage firm HDFC Securities in a note.
At 11:23am, the Nifty IT index was down 3.5 percent at 28,096 points and the worst performing sectoral index on the National Stock Exchange.
Electric 2Ws, 3Ws may lap up major chunk of total sales pie by 2030: Report
The report released on the sidelines of the 62nd annual session of ACMA here, noted that "sales of new electric two (2W) and three-wheelers (3W) could grow to 50 and 70 per cent, respectively by 2030," it said.
Electric two and three-wheeler sales in India are expected to grow at a fast clip and account for 50 and 70 per cent, respectively of the total sales by 2030, a report said. The report is jointly prepared by the Automotive Component Manufacturers Association (ACMA) and McKinsey.
It said that in India, the total cost of ownership is likely to be more attractive for electric two and three-wheelers, than for passenger or heavy commercial vehicles.
The report released on the sidelines of the 62nd annual session of ACMA here, noted that "sales of new electric two (2W) and three-wheelers (3W) could grow to 50 and 70 per cent, respectively by 2030," it said.
The report stated that internal combustion engines (ICE) will continue to dominate the Indian passenger and heavy commercial vehicle landscape, with slower electrification. Electric passenger vehicles and heavy commercial vehicles are expected to account for 10-15 per cent and 5-10 per cent of new vehicle sales, respectively by 2030, it added.
According to early estimates, a transition to EVs could impact up to 50 per cent of ICE bill of material (BOM) components, the report said. This could disrupt the portfolio of incumbents in traditional ICE component categories, it added.
This disruption could be an opportunity too creating multiple whitespaces for companies to cater to the new EV BOM needs and generate avenues to serve markets outside India in both ICE and EV component categories, the report said.
It noted that while there is a cause for optimism, the push for clean mobility and corresponding growth in the adoption of electric vehicles could disrupt the automotive landscape over the course of this decade.
Europe and China are expected to be front runners in this shift with the rest of the world following suit eventually, it stated. The report further said emerging markets India and China are likely to lead the overall automotive space with sales of passenger vehicles expected to rebound to peak levels by middle of this decade.
The long-term prospects for the industry remain strong despite near-term supply disruptions, it added. The domestic auto component industry needs to expand exports by diversifying beyond traditional geographies in order to benefit from the changing industry landscape, the report said.
"Specifically for tapping the exports opportunity, a dedicated multi-stakeholder task force (comprising ACMA, SIAM and the Government) could systematically enable and empower industry players through OEM connects, cross-border M&A, shifting of manufacturing, policy support, trade agreements," the report stated.
The success of auto component manufacturers in the face of EV-linked disruptions would not only enhance their growth and relevance, but also be a boost for India, the report said.
It would consolidate India's position on the world map as a future-ready hub for manufacturing, it added. "This calls for a concerted effort by all stakeholders across the government, industry bodies, OEMs and suppliers. Each of these could be a crucial enabler in helping the industry to prepare for its next phase of growth," it stated.While the pace of national highway (NH) construction in the country had touched a record 37 km per day in 2020-21, it had slowed to 28.64 km a day in 2021-22, due to pandemic-related disruptions and a longer-than-usual monsoon in some parts of the country.
The pace of national highway construction in the country has slowed to 19 km per day during the first five months of the current financial year, according to official data.
While the pace of national highway (NH) construction in the8 country had touched a record 37 km per day in 2020-21, it had slowed to 28.64 km a day in 2021-22, due to pandemic-related disruptions and a longer-than-usual monsoon in some parts of the country.
"The Ministry has constructed 2,912 km of National Highways up to August 2022, as compared to 3,355 km up to August last year. The Award figure is 2,706 km during this period as compared to 3,261 km in the previous year," the Ministry of Road Transport and Highways (MoRTH) said in its monthly summary for the Cabinet for August 2022.
According to the ministry data, the award figure is 2,706 km during April-August this year, as compared to 3,261 km in the corresponding period a year ago.
The National Highways Authority of India (NHAI) and National Highways and Infrastructure Development Corporation Ltd (NHIDCL) are primarily responsible for the construction of national highways and expressways across the country. The official target of highway construction has been kept at 12,000 km for the current financial year.