Mumbai: Dark clouds are billowing over the Indian software sector following the

terror attacks in the US. Analysts across the spectrum are giving thumps-down signals to Indian software companies that have shed 30 to 60 per cent in value in the market since the Terror Tuesday.

The slowing US economy, geopolitical uncertainty, falling billing rates and the slump in outsourcing are making the Indian software companies feel the pinch. ''The September 11 events have upset the applecart and we once again find ourselves in the midst of significantly increased uncertainty,'' says an analyst at JP Morgan.

Earnings of software bluechips like Infosys, Wipro, Satyam, which have 60 to 80 per cent of revenue coming from the US, will be under attack. The offshore outsourcing by US companies is likely see a fall in the coming years, as an economic slowdown is looming large in the horizon.

Analyst have already scaled down their earnings outlooks for leading software companies to a moderate 13 to 18 per cent year-on-year (YoY) earnings growth in the next financial year, against market expectations of 30 to 35 per cent. Nevertheless, analysts feel the coming quarter earnings of Indian softies may not be affected by the recent developments.

Says a CLSA report on India software sector: ''More than 80 per cent of the revenues derived by Indian software companies are on a time-and-material basis. These earnings are more resilient to sudden environmental changes.''

About what is store in the future, the report said: ''Though new clients or new projects scheduled to start in the coming weeks may be delayed, the existing contracts will continue. Hence, the current quarters are unlikely to be impacted by what happened in the US on September 11.'' It, however, said the companies would start feeling the pinch from the next financial year.

As most of projects typically take two-to-three quarters to ramp up to significant levels, the current sentiment could impact the January-March 2002 quarter earnings. Further, November-December is when most US-based companies normally do budgeting, and the current uncertainty will almost certainly impact decision-making.

Analysts say the frontline software companies would be able to grow, whereas second-rung companies may show a drop in earnings. They, however, said the companies like Wipro and HCL Technology would be severely impacted given their higher focus to technology and telecom domains, which would continue to face business pressures as recovery in the US economy gets delayed.

In the event of a war, US clients may be averse to offshore outsourcing, especially from India on account of the geopolitical uncertainty. The sectors like insurance and banking were badly hit by the terrorist attacks and this will have a major impact on the Indian software companies in terms of new order flows.

Financial services have been among the largest revenue contributors, accounting to 30 to 35 per cent of the Indian software companies. Lower consumer confidence in the US will also impact the clients in the telecom and retailing segment. Also, billing rates are showing a depressing trend in the US.

Even a large premium player like KPMG Consulting admits to billing rate pressures and has cut billing rates in order to push up utilization levels, says a SG Asia report. Wipro, the only Indian company that showed billing rate improvements over the past two quarters, said it was reviewing its policy of maintaining billing rates - which was based on an expectation that the pressures would be short term.

Though Indian companies have been adding new clients, deals size did not look very attractive. The clients were not ramping up assignment sizes at the same pace as before.

SG Asia report reasons that the US CIOs and IT managers are trying their best to retain jobs of onsite team directly working under them. Several US companies said clients were parceling assignments into smaller sizes of $2 million to 2.5 million, against $10 million they might have awarded a year ago.

This could mean that it is going to be tough times ahead for the software sector in the country.