IT catches Covid-19 bug: Sector's outlook takes a hit on demand concerns

Analysts expect top line pressure to reflect from Q4 itself.

Information Technology (IT) stocks, which were considered as ‘defensive’ until recently, have been under heavy pressure due to demand concerns caused by the outbreak.

The Nifty IT index has shed close to 20 per cent in a month, in line with the Nifty50. The expected earnings pressure, mainly on account of a tepid top line, is weighing on sentiment.

Analysts expect top line pressure to start reflecting from the March quarter itself, given the supply-side disruption amid the lockdown and business disruption in key markets such as the US and Europe. Besides lower billing and utilisation (lower productivity on account of travel restrictions), the disruption will also hit margins, despite a sharp depreciation in the rupee.

The major impact will be felt in H1FY21 (April-September 2020), with demand from clients expected to be sluggish. This will hurt earnings visibility for the entire FY21, given the first half is typically vital for the sector. This is when most of their clients announce their IT budgets.

Therefore, analysts at HDFC Securities have slashed their earnings estimates by up to 12 per cent for top IT players, and by a sharper (up to 28 per cent) magnitude for mid and small IT companies.

According to Sanjeev Hota, head (research) at Sharekhan: “The rapid spread of the virus has caused disruption in the supply side, and is likely to impact demand in the near term, driven by the cut in discretionary spending by clients, lower billing, and pricing pressure.”

This will impact IT firms’ financial services segment (mainly on account of lower global interest rates) and the retail sector, and consequently take a toll on overall revenue growth, as these two segments contribute 30-45 per cent to revenues of most players. Other analysts expect no growth in 2020-21 (FY21).

Brazilian President Bolsonaro calls for investments by Indian companies

Brazil is pushing India to expand its footprint in the country's mining, power and agri business sectors.

Brazilian President Jair Bolsonaro on Monday called for greater investment by Indian conglomerates in the Latin American country's infrastructure, railways, mining and energy sectors.

Addressing senior captains of industry, Bolsonaro, along with senior minister's from the Brazilian government pitched for more investments from India. Brazil's economy is broadly expected to slowly regain health in 2020, with gross domestic product growth estimated at 2.3 per cent by the country's central bank.

Winning on a populist plank to eradicate poverty and clean up corruption, Bolsanaro has pushed for large scale foreign investment to tap the country's vast natural resources, especially in the Amazon rainforest in the scarcely populated hinterland. Indian companies have invested about $ 6 billion in the country, and has significant footprint in multiple sectors sectors.

This includes Information Technology giants such as Tech Mahindra and Tata Consultancy Services which has about 1400 employees. In the mining sector, Sterlite Power has won 10 power transmission projects across 11 Brazilian states totalling 29 transmission lines and 34 substations while Birla Carbon, the world's largest carbon black producer, completed 60 years of operations in Brazil in October 2018.

Pharmaceutical, Energy, engineering and automobile production were also sectors central to Indian business interests, sources said. Policymakers said that among that bilateral pacts to boost cooperation in oil and natural gas and bio-energy, that were signed over the weekend is expected to see significant Indian businesses entering Brazil.

Bolsanaro met with 23 Indian business leaders from companies including those from Sterlite Power, Apollo Hospital, Oyo Rooms, Tech Mahindra, Tata Consultancy Services, Zydus Cadila, and Transport Corporation of India Limited, among others.

Business Standard

As 5G rollout nears, the unending debate over health effects is back

5G networks will use a frequency band separate from the already congested 4G networks.

Business Standard : Affordable access to the fourth generation of wireless communication, or 4G, has had us hooked to our phones for a large part of the day. It’s our gateway to the news, entertainment and to commerce. But what’s coming next may change the way we interact with the internet forever. At transmission speeds of over 1 gigabit per second, 5G – the fifth generation of wireless communication – will be more than 20-times faster than 4G.

At these speeds, the concept called internet of things – where one internet-linked device can send and receive data from another such device – would become more workable. But to enable data traffic at this rate, telecom companies will have to change the way they send data.

5G networks will use a frequency band separate from the already congested 4G networks. And instead of relying on low-frequency radio waves like 4G and all its predecessors did, the 5G network is set to make use of high-frequency radio waves. These would carry more data and enable faster transmission rates.

But there’s a catch.

The millimetre-long radio waves that will do much of 5G’s bidding cannot travel over large distances. They will have to be intercepted and re-beamed after about every 500 metres. To do this, telecom companies plan to place several small antennas 500 metres apart, cramming them in close spatial quarters. This could expose us to radiation from more sources than before.

Unlike X-rays and ultraviolet radiation, radio-wave exposure is non-ionising. It doesn’t damage the DNA per se. However, some studies have shown that continuous exposure may cause small amounts of localised heating. Whether this could lead to more serious health effects is a question many researchers have asked – and the answers remain out of reach.

Few reports have shown a positive relationship between telephone use and cancer. However, there are as many studies that show no association between the two. “So far, the body of evidence is not large enough to say that the association is conclusive,” Manya Prasad, a senior resident at the All India Institute of Medical Sciences, New Delhi, told The Wire