Now comes the question of the rate at which they would be paid. Tech companies in India believe that offshore rates are already significantly lower compared to onsite rates and there is little scope for downward revision. Any decline, if it takes place, will be more than offset by an increase in the volume of work. Compare this with Wipro, which recently declined to renew its contract with GE, which was offering lower rates. GE is one of the tough paymasters in India.
Companies can afford to refuse work only when their hands are full.
Another aspect which cannot be ignored is that most technology and telecom stocks with the exception of Infosys and Wipro are quoting at a PE multiple of less than 20 on their historical earnings. On a forward year earnings, they would be quoting at a PE multiple of around 10. In tech stocks quoting at a PE multiple of around 10 and expected to post a good growth in the next fiscal as well or in ACCs which quote at a PE multiple of 60 and still expected to post meagre earnings. Long term investors need to keep this in view. We feel technology and telecom stocks cannot be written off either in the US or Indian markets.