Could Spike in Onsite IT Job Listings Imply Better Demand for India IT Vendors?: Morgan Stanley Research,

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Could Spike in Onsite IT Job
Listings Imply Better Demand
for India IT Vendors?
Quick Comment: We note that despite continuing
challenges in the macro economic environment and a
persistently high unemployment rate in the US, there is a
sharp spike in onsite job listings (US) in the IT industry
and related occupations as per Monster index. The
spike in online US job postings appears to strengthen
TCS management’s claim of continued strength in the
demand environment and may even indicate a further
pick-up in our view if these trends sustain.
Monster Jun-11 US Employment Index (published
every month) indicates a spike in onsite job listings:
We note that overall employment index has moved up
slightly in June 2011. However, specific industries like
Information industry and occupations in computers and
mathematics showed a sharp spike in Jun11. The index
for these industries and occupations are currently at
their highest levels in last 2-3 years. Our channel checks
indicate a significant surge in the IT/BPO jobs listed on
online job search websites in India as well over last
month.
What could be driving the spike in online listings?
We believe the surge in job listings could be due to
higher demand, increased use of sub-contractors,
in-house demand from captives or continued high
attrition. Whatever the reason, a sustained spike in job
listings could translate into 1) continued strong volume
growth, and 2) improved prospects for price negotiations
for India IT companies in FY12e, in our view.
Maintain In-Line view on the industry: We believe
that despite a healthy demand environment, all stocks
are unlikely to benefit uniformly in the sector. We remain
positive on Infosys and HCLT amongst the larger
vendors. We expect range bound performance from
TCS and Wipro. In the small and mid cap space we are
cautious on Patni and Mphasis ahead of results due to
company specific margin concerns.