But the reaction to the results does mark a logical turning point and captures some of the imperatives for the near future. Recent market adulation for both TCS and HCL Technologies stocks had known no bounds. Things had to come down to earth sooner or later and being able to deliver spectacular results endlessly is as difficult as it is to indefinitely sustain exceptional valuations. Another turning point is that the global demand outlook for information technology has turned a bit uncertain along with the International Monetary Fund cutting its global growth forecast for the current year. Demand for information technology service is more stable than overall demand, but if the latter falters, then one has to say goodbye to seeing another boom a few years down the line. It is just as well that the bubble that is internationally emerging in start-up valuations has not affected information technology stock valuations down the line as had done at the turn of the century.
As for Indian information technology firms, they now face heightened exchange-rate uncertainty. Analysts too often bandy around "constant" currency numbers. That is a piece of statistical fiction; annual accounts are written using current currency values. There are two ways of protecting a company against exchange-rate uncertainty. One is to extensively cover one's currency exposure. If you have speculated and not done so, don't come to the central bank crying, the Reserve Bank of India governor implied recently, while underlining the current low level of hedging. The other way is to grow the cushion of domestic demand. On this score, the National Democratic Alliance government's desire to vastly expand the scope of e-governance is good news indeed. The software industry must measure up to the occasion and deliver without mishaps in order to take advantage of the enormous potential ahead.