The Hindu Business Line : IT gains suggest tech boom revisits

IT was quite an eventful trading day at the stock market. The frenzied activity in technology sector stocks along with a sharp recovery in indices from the day's low was the highlight of the day's trading. After dropping to a low of 5743.58, the Sensex recovered smartly to close at 5904.52. This represents a 120.73-point increase over Monday's close.

The S&P CNX Nifty mirrored a similar trend and closed higher by 40.25 points at 1878.45. Infosys' three-for-one bonus offer set the tone for the sharp up move on Tuesday. The encouraging earnings guidance and the special dividend also played a part in propping up market sentiment towards the technology sector stocks.

The share price of Infosys shot up by Rs 350.35 or about seven per cent to close at Rs.5490.2. Trading volumes more than doubled to 5.47 lakh shares from 2.19 lakh shares recorded on Monday.

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Apart from the bonus offer, the company announced a special one-time dividend of Rs 100 per share.

Quite a few other technology stocks too, including Satyam, Wipro and Hughes Software, notched up impressive gains during the day. There have been very few instances since early 2000 when technology sector stocks have seen such euphoric rise.

The market frenzy for this sector is better captured by the 7.1 per cent increase in the CNX-IT Index that closed at 21923.6 on Tuesday.

The firm trend in old economy heavyweights such as Reliance Industries, Tata Motors and State Bank of India also helped the cause.

HDFC, Hero Honda BHEL and Ranbaxy were prominent among the losers out of the stocks that form part of the Sensex. The share price of Hero Honda dropped by Rs 3.35 to close at Rs 501.50.

While technology stocks recorded impressive gains on Tuesday, the likes of HCL Infosystem and MphasiS BFL were prominent ones that did not feature in the gainers list. The share price of HCL Infosystem dropped by about three per cent and MphasiS by a little over one per cent.

Along with technology sector stocks, the ones from the banking industry too logged significant gains on Tuesday. Public sector banks such as Indian Overseas Bank, Vijaya Bank and State Bank of India were prominent gainers from the sector.

The increase in share price of these banking sector stocks was accompanied by a sharp spurt in trading volumes as well. The Indian Overseas Bank stock rallied by about 15 per cent before settling at Rs 68. Trading volumes zipped to 33.3 lakh shares from 4 lakh shares recorded the previous day.

For the second day in succession, Jagsonpal Pharma and Elder Pharma recorded sharp gains. In the case of Elder Pharma, the share price spurted by about 10 per cent complemented by a sharp rise in trading volumes to 3.06 lakh shares from 72,671 shares.

Companies from the cement sector too attracted market interest on Tuesday. ACC, Gujarat Ambuja and Grasim and Birla Corp were prominent gainers during the day. The share price of Birla Corp increased by about six per cent to close at Rs.71.2. From 1.2 lakh shares recorded on Monday, trading volumes jumped to 2.7 lakh shares on Tuesday.

After the initial euphoria since listing, the Biocon stock got a drubbing on Tuesday. It dropped by 10 per cent to Rs 622.4. Trading volumes jumped to 93 lakh shares from 20 lakh shares recorded on Monday. Biocon got listed at the BSE on April 7 and recorded a 43 per cent spurt in share price since listing.

The bullish market sentiment was of no consequence for select pharma stocks such as Aurobindo Pharma, Unichem Labs, Ranbaxy and Wockhardt; the share price of these companies closed on a weak note on Tuesday.