Modest sequential Q4 revenue growth for IT companies: Analysts

New Delhi: Seasonal weakness may result in modest sequential revenue growth for large Indian IT firms in the January-March 2016 quarter, analysts said.

Headwinds from depreciation of the British pound (GBP) and other cross-currency movements may also negatively impact USD revenues by 30-50 basis points for the said quarter.

Infosys will kick-off the results season on April 15, followed by Tata Consultancy Services and Mindtree (April 18), Wipro (April 20), Cyient (April 21) and Persistent (April 23).

According to a Kotak Institutional Equities report, margins will improve for most companies after Chennai floods-led decline in the December quarter, whereas about 2 percent depreciation in the rupee will also help.

"We expect March quarter results and management commentary to lend comfort on 2016-17 moderated estimates. Portfolio of clients and the ability to participate in digital(projects) will significantly influence growth of IT companies in the current fiscal," it added.

Emkay Equity Research said more clarity on demand trend is required to conclude that "the turnaround" or acceleration in the US dollar revenue growth for the sector will continue given challenges in the BFSI, telecom and energy verticals.

Investors would also watch out for the outlook on business from Europe as growth in recent quarters has been declining in local currency terms for many tier I companies, it added.

Also, the impact of ongoing mergers and acquisitions on demand in select verticals like healthcare and pharma from clients would also be keenly watched, analysts said.

Religare Institutional Research expects a "soft quarter" for mid-cap IT services firms with flat quarter-on-quarter US dollar revenue growth.