The shares of the IT companies are rising once again as the top four players in the industry reported results which were better than street expectations. The sector also resumed hiring in the December quarter after adding only a few employees in the earlier quarters.

Some experts however believe that there is not enough growth prospect left in the near term after the upside rally by IT sector shares. The shares of TCS, Infosys, Wipro and HCL rose by 2% on top of 4% growth in the previous quarter, on an aggregate basis. Their aggregates net profit also rose 6% in the quarter.

Despite the rupee appreciating the companies improved their operating margins recording a growth in net profit which is faster than the growth in sales. The rising rupee was offset by many factors such as efficient workforce utilization, lower administration expenses and good currency movements.

The sector performed well mainly due to the rising demand from sectors such as banking, financial services and insurance and manufacturing. Sectors like energy and utility and healthcare and pharmaceuticals also contributed to the demand.

The IT companies are now more optimistic about the future prospects however with caution. Infosys expects a marginal dollar revenue growth in the March quarter while its earlier expectation was a 4.8% drop. The company recorded 6.8% growth in the third quarter and thus the guidance looks good enough. TCS expects dollar revenue to grow by as much as 5% sequentially in the next quarter over and above the 5.8% growth in the December quarter.

Wipro recorded higher revenues from markets including Europe, Middle East and India in the third quarter even as other players in the sector witnessed a sluggish demand from Europe. Results from different companies indicated different scenarios but the positive sign that affirmed the recovery was that the players resumed hiring.

TCS added a total of 7,700 employees in the December quarter and Infosys had already announced the plan to add 4,000 more employees by the end of the fiscal. Wipro is also recruiting with a focus on fresh graduates as the company plans to employ 7,500 in the next six months.

The recessionary pressures pushed the companies to rationalize their view. Now, their operations look leaner and more efficient. Employee utilization for the companies has also improved.

At the current stock prices, the top three players are trading at FY10 estimated P/Es of 22-25. The forth quarter is expected to provide the outlook for near tern performance on the sector.