The Hindu Business Line : Uneasiness affects infotech stocks

INFORMATION Technology stocks today led a substantial fall in the benchmark indices. An air of apprehension coupled with constrained liquidity flow saw the sector leaders tumble.

Mr Arun Kejriwal, a market analyst, feels that Infosys results coming this time late by a week than usual on April 14, which is a trading holiday, has made a section of the market cautious. "It is being read as an indication of a possible weak result", he added.

Mr Ajit Day of Dayco Securities, said that the valuations in the midst of squeezed margins across the board seem to be on the higher side. "The fancy P/E multiples may be in for a preview if FIIs become a little less aggressive," he added.

Mr Gul Teckchandani, an investment strategist, however, saw the current weakness as an opportunity for long-term investors. "Fundamentally, nothing has changed to dim the outlook. Consider that quarter-on-quarter recruitment and scalability of the domestic IT companies have been going up", he observed.

According to Mr Ramesh Damani, an investment analyst, the apprehension that the rupee would rise further against the dollar and thus affect earnings for IT stocks is unfounded. In the previous fiscal, a few of the domestic IT companies had suffered because they could not play their currency cards well, but the general perception this time around is that they are now comfortable in hedging their currency risks.

"The sector has been proving to be inflation-proof and more or less emerged as a defensive sector for investors across the borders," Mr Damani said. Some of the mid-cap IT companies appeared to paint a brighter growth picture, he added.

Mr Abhay Aima, head of the equity cell of HDFC Bank, said: "We are neutral to positive on the performance of the IT companies and not at all negative about their outlook. We also do not any nasty surprise in terms of guidance".

According to Mr Gaurav Dua of Anagram Stockbroking, an uncertainty prevails on the impact of fringe benefit tax. "FBT may prompt companies like Infosys to come out with a conservative guidance for 2005-06," he added.

Some analysts, however, felt that MphasiS BFL and Polaris are still not out of the woods really. While possibility of Bearing Bank existing BFL has been affecting the sentiment for the stock, Polaris' recovery is presumed to be incomplete.

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