¾ We expect companies under our coverage to report strong revenue growth in this seasonally strong quarter. USD revenue growth is expected to be 2.3% - 3.8% for the Top 4 companies under our coverage. Cross-currency movements will provide a tailwind of between 20bps and 45bps to the revenue, we estimate. The QoQ rupee appreciation of 1% (v/s USD) will impact INR revenue growth and also margins. For all the companies in our universe, we expect a 2.2% growth in INR revenues. Margins are expected to fall on the back of rupee appreciation, salary hikes for most companies and higher visa expenses.
¾ We will watch out for management comments on any early indications of impact of Brexit on client budgets / spending. We expect the demand commentary to be generally positive, except for the continuing issues in Energy and Insurance. Further clarity on the trends in Digital spends by clients and the scale up in these revenues by various Indian vendors will also be important. We expect Infosys to maintain its FY17 guidance of 11.5% - 13.5% in CC terms. NASSCOM has guided for of 10% - 12% growth for the industry. We maintain our constructive view on the medium-to-long term prospects of the sector on expectations of improving demand over this period. However, we prefer large caps which are well-equipped to handle the churn towards Digital. Infosys and TCS are our picks. In mid-caps, we prefer NIIT Limited.
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