How did the IT sector fare in April-June quarter?

Excerpts from Igate's CEO Phaneesh Murthy on:

The first quarter (April-June FY11) earnings season has come to an end. In Q1FY11, the key takeaways from Q1 for the IT sector are:

- Volume momentum is strong with sequential volume growth of 5-9% quarter-on-quarter by Tier I companies.

- Strong demand outlook on better pipelines.

- More or less stable pricing.

- Positive outlook on enterprise IT spending.

- Signs of discretionary spending looking up.

- The problem vertical remains telecom.

- The manufacturing vertical shows signs of improvement.

- There is good performance from the US region and BFSI (banking, financial services and insurance) vertical.

- Europe continues to be in wait and watch mode. There is a disconnect between the macro and micro situation in Europe.

Concerns:

- The increase in attrition for all companies.

- Increasing probability of wage hikes across the industry.

- Lack of pricing power, and difficulty to pass on cost increases.

- Tier-I companies are better placed to absorb cost pressures.

- The mismatch between growth expectations led to company maintaining lower benches.

Strong lateral hiring led to higher attrition. Another wage hike in FY11 is not anticipated. Growth, was mainly on the back of IT budgets, pent-up demand, and low hiring. "Demand was stronger than expected for IT services.

US Inc is not hiring due to fears from a double-dip recession in Q3 & Q4.

Pricing environment is stable currently.