At Infosys Q2, Focus likely to be on Vishal Sikka's Strategy

Infosys will report its September quarter earnings on Friday. Infosys quarterly results are closely tracked by market analysts because its numbers often decide the direction of the broader markets. Infosys has the second highest weightage in the Nifty.

The second quarter results are also important because it will have some imprint of the company's new CEO Vishal Sikka, who took charge of Infosys on August 1.

Here are 10 things to know before Infosys reports its Q2 numbers,

1) Infosys, India's second largest outsourcer, has lagged behind its peers such as TCS (India's biggest outsourcer) and HCL Tech (fourth biggest) in revenue growth over the last few quarters. The trend is expected to continue.

2) Nomura expects Infosys to log 2.6 per cent quarter-on-quarter (sequential) growth in Q2. Barclays expects slightly higher (3.1 per cent) growth for Infosys.

3) Compare that to TCS, which is expected to grow at 5 per cent (Nomura). Tech Mahindra may grow at 3.4 per cent and HCL Tech at 3 per cent, while Wipro (2.5 per cent) and Cognizant (2 per cent) may lag Infosys, Nomura estimates.

4) IT companies' margins are likely to go up because of nearly 1 per cent fall in rupee between June and September. Infosys and TCS are likely to report a 50 basis point sequential rise in ebit (operating) margins, Nomura says. However, Wipro, HCL Tech and Cognizant may see a decline in margins (60-90 basis points according to Nomura) because of wage hikes.

5) It will be interesting to see if the demand environment in US - the biggest market for Indian outsourcers - has improved. Tier 1 IT companies' revenue from US has grown at 12 per cent in the last twelve months as compared to 22 per cent in Europe and 14 per cent overall, Nomura says.

6) Infosys is among the handful of companies in India to give a sales outlook. It's current guidance of 7-9 per cent revenue growth (in US dollars) is lower than the overall IT industry, but analysts say Infosys will stick to its stated guidance tomorrow.

7) TCS is again expected to top in terms of growth. The company expects to better its 2013-14 performance (16 per cent) this fiscal. Wipro, which gives quarterly guidance, is expected to project for 3-5 per cent sequential dollar revenue growth in the December quarter, Nomura says.

8) What Infosys' new CEO will do to bring the company back to an industry level growth path will be closely watched. Barclays says the key investor focus will be on management commentary about the new strategic path of the company under Dr Sikka.

9) Any indications of likely return of cash to shareholders (dividend/buyback) would be taken positively. In August, former Infosys employees had written to the company urging the management to buy back shares worth Rs. 11,200 crore. Infosys had cash and cash equivalents of Rs. 25,000 crore as of June 30, 2014. (Read the full story here)

10) Infosys shares fell sharply yesterday (4.7 per cent) after Citi downgraded the stock citing nearly 15 per cent run up in the past three months. Infosys' performance, till Tuesday, was in line with the IT sub-index on the BSE. However, analysts expect sharp volatility in Infosys shares if earnings don't meet Street expectations. (Read)

Infosys shares closed 0.13 per cent lower at Rs 3,645.55 as compared to a 0.07 per cent gain in the broader BSE IT benchmark. (Track stock)