The Hindu Business Line : Fund managers still betting on Infosys

Kolkata, July 12 A whole range of equity funds, both straight-laced and thematic, have a marked exposure to Infosys Technologies, which dipped today by 4.5 per cent, partly causing the index to lose ground.

The Infosys stock on Wednesday lost about Rs 90 to close at Rs 1,929.65 on NSE. The day’s high, also the opening mark, was Rs 2,000. On Thursday, it dipped a little more, by 0.39 per cent, to close at Rs 1,922. On both days, trading volumes were large.

The stock, MF circles are of the view, forms a critical part of a number of portfolios, thanks to fund managers’ intention to hold a piece of this heavyweight index constituent. Infosys has been a leader on many fronts, frequently chosen by investors who have wanted to gain from movements recorded by the stock.

Fund houses feel the stock should not be seen merely on the basis of quarterly numbers. Mr Vivek Kudva, President, Franklin Templeton, said: We feel a company like Infosys will be able to handle the situation well. However, wage costs are indeed rising, a factor that should ultimately be seen in the context of India’s competitive edge”. Several of FT’s funds hold the stock; the latter, in fact, accounts for a very large part of its technology fund portfolio.

Fairly held

Data put out by fund advisory outfit Plexus Management suggests Infosys is fairly widely held. Among the diversified equity funds that have in recent times substantially allocated to it are Baroda Global (5.4 per cent), DWS Alpha Equity (6.9 per cent), Franklin India Bluechip (5.4 per cent), LIC MF Equity (6.5 per cent) and Reliance Vision (5.5 per cent). The figures pertain to end-May.

“The appreciation in the rupee has had a bearing on the company’s earnings. This may well be an important determinant for other IT companies as well. The market will watch developments pertaining to this aspect closely”, commented a source who has been lately tracking the stock.

Increasing salary levels is also being cited as one of the reasons that have impacted the company’s margins. The IT sector, it is being pointed out, will have to generally grapple with this factor in the days ahead – like a number of other fast-growing services segments.

The current market price implies that the Infosys stock trades at a price-earning multiple of 20 (fiscal 2009 estimated EPS). The 52-week high for the stock is Rs 3,400.

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