The Hindu Business Line : IT stocks gain amid cautious mood

Mumbai, Sept. 19 Shares of Indian IT firms today entered the positive trajectory, buoyed by sentiments that the cut in interest rates by Federal Bank may help prevent a recession in the world’s largest economy.

However, sustained rise in the FII dollar inflow as a result of the FED cut could ensure that the rupee continues to rule firm. The general consensus in market circles is that the Fed cut may signal return of buoyancy in the US economy, thereby offsetting the impact of the rising rupee to some degree.

“Though it is early to take a view whether the credit crunch in the US will ease post the Fed’s move, from an IT firm’s perspective a buoyant US economy is a reason to cheer,” said Mr Amar Chintopanth, CFO of 3i Infotech. A slowdown in the US means that companies who outsource work to Indian IT firms may tighten their IT budgets, thereby impacting revenues of third party vendors. IT firms have accepted currency fluctuations as part of their business model and are sewing plans keeping that in background, according to Mr Chintopanth.

IT firms and investors expect the rupee will stay in the 39-42 range in the near to long term, said Mr Gaurav Dua, IT Analyst at Sharekhan Securities. “IT companies will be concerned only if the rupee strays out of this range. More than the appreciation of the rupee, these companies were concerned with the slowdown in the US, which would have eaten into their revenues.”

“The Fed cut is a step taken to strengthen the US economy, which is in a tight position. This signals that there is a real possibility of the dollar further weakening against the rupee,” said Mr Anil Advani, Head of Research, SBICAP Securities.

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