The Hindu Business Line : Shift towards IT stocks

WITH oil prices firm and rise in old economy stocks, big investors are now shifting their positions to IT stocks. Within this category, the interest is primarily in large-cap stocks like TCS, Infosys, Wipro and Satyam Computer.

Dealers said that the interest was because many of the IT stocks did not participate in the bull run and look undervalued compared to manufacturing companies.

Moreover, lot of mergers and acquisitions is likely to be seen in the IT sector. The interest of traders and investors in this sector is seen from the rise in the IT index. The BSE IT index was up 0.27 per cent when other indices were down on Friday. On the NSE, the CNX IT index was up 0.12 per cent.

Large-cap stocks firm

AT a time when most of the mid-cap and small cap stocks have fallen, large-cap stocks have ruled firm in the last one week.

Dealers said that there has been a shift of investors from small-cap and mid-cap stocks to large cap stocks due to fear that stock exchanges and the SEBI could take action against several of the companies.

Investors who want to keep their money in the stock market are being advised by their brokers to be invested in large caps. The reason for this shift is that several FIIs are now interested in quality companies as the valuation of small cap stocks are more stretched. This is seen from the Nifty and the Sensex remaining firm during the week when other indices have fallen.

NAV propping helps indices

IN yet another volatile day, the Sensex and the Nifty closed with marginal loss. The indices rebounded sharply from their day's low when the Sensex was down by more than 100 points.

The sharp rebound was mainly due to propping of mutual funds' NAVs on the last day of the quarter. Fund performance is judged by the NAV at the end of each quarter. Dealers said that this is a normal practice at the end of each quarter.

The market buzz is that after the expiry of derivatives contract, the indices were expected to fall, but this did not happen due to NAV propping. The next week is likely to witness fall in the price of the index stocks as traders would book some profit.

Virendra Verma

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