Wells Fargo raises offshore IT/BPO sector

Reuters - Wells Fargo Securities raised U.S. offshore Information Technology and business process outsourcing sector to "market weight" from "underweight," and said the market displays signs of bottoming, although an upturn is not yet visible.

The second-quarter results reflected signs of market stabilization, especially in the critical financial services and North American markets, analyst Jennifer Fritzsche wrote in a note to clients.

Prominent offshore IT services firms including Infosys Technologies Ltd, Wipro Ltd and Cognizant Technology Solutions have beaten quarterly profit estimates in their latest earnings.

The worst of price pressure is behind and there are improving opportunities in non-traditional markets such as India-to-India and into Japan, Fritzsche said.

"Balance sheets continued to strengthen with all the leaders having significant net cash positions... and provide "dry powder" for any M&A driven offering expansion," the analyst wrote.