'IT cos can see a repeat of Q4 in Q1'

ET Now caught up with Pankaj Kapoor, analyst, RBS Equities ( India), to find out his views on the currency impact on IT firms.

We have seen that economic uncertainty, coupled with the weakening currency in Europe, has definitely sent most of those IT stocks battered down because of the fallout in the US. Where do you see the euro heading from now?

We have been seeing a hit coming both in the GDP and in the euro, and this is going to be a similar to what we saw in the last quarter. So, based on the current trends, we are looking at a similar kind of a negative hit of about 1-1.5% to cross-currency impact for most of these tier-1 IT companies. HCL Tech or players such as Tech Mahindra who have a higher exposure to GDP will take a marginally higher hit. We are going to see a repeat of the fourth quarter in the first quarter if the numbers stay where they are. If the euro goes down much further, or more importantly if the GDP goes down much below, the impact would be slightly higher.

Most analysts are speculating that there is a potential for the euro to drop even further that the euro will be equivalent to the dollar. Do you also believe that there is a further downside of about 20% and that the euro and the dollar will be at par? Is that a possibility or is it very farfetched?

That is a question probably an FX analyst will be better positioned to answer. I will not have a view on how the currency is going to behave. There are a whole lot of macroeconomic factors that are driving it, but I will not have much idea on what will be the near term trend in the euro value.