Prefer TCS, HCL Tech: Emkay

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IT services sector report by EmkaySep’15 quarter: Currency depreciation to boost operating performanceA 2.8% QoQ average currency depreciation should boost the operating performance for the IT Services universe in the Sep'15 quarter. We expect strong constant currency sequential growth performance across both TCS and Infosys although cross currency headwinds will shave off ~60-80 bps QoQ off the reported US$ revenue growth The YoY US$ revenue growth for the Tier I universe is estimated to continue the moderation trend and is expected to be ~10% YoY for the Sep'15 quarter, marking the 7th quarter of declining trajectory. In our view, growth trajectory from US, Financial Services both not seeing any improvement) and Europe (held up strongly) needs watchingCurrency resets drive earnings/target price changes across the universe. We continue to prefer TCS and HCL Tech amongst the Tier I universe although Infosys's strong commentary on achieving their FY16 revenue outlook could continue to support near term stock performance. Amongst Tier II techs, continue to back up sides for NIIT Tech, eClerx and Hexaware. Mindtree's valuations remain punchy after the strong run up in anticipation of a strong Sep'15 quarter show.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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