The Hindu Business Line : IT stocks witness profit booking

IT stocks wilted ahead of third quarter results. According to analysts, top IT stocks witnessed profit booking as the latest US job data failed to provide any positive signal while the rupee moved up 0.22 per cent against the green back.

The BSE IT Index finished with a loss of 1.02 per cent on Friday while the benchmark Sensex comfortably closed the session up 2.38 per cent, after touching its all-time high.

Spending plans

According to Mr Ajay Jaiswal, an analyst with Angel Broking, the IT counters are drifting sideways in absence of clear direction. “All the top stocks are in the midway between their recent lows and tops.”

From January 11 onwards, the quarterly results are likely to come in.

Till then, a drifting price trend could reflect the market’s indecision. There is still no clarity on the US IT spending plans.

But industry insiders said in the next four weeks many of the Key US spenders would firm up their annual budgets.

Mr S. Mahalingam, CFO, TCS, feels though the US financial sector has been through a troubled times in the past quarter, no corporate has said they are reducing spending.

He said that so far the existing rates have not come under pressure.

Till the dollar touches Rs 40 or above, there will be sustained weakness in IT stocks. The market is waiting for Infosys quarterly results and guidance to provide direction," said Mr Vishwas Agarwal, independent technical analyst.

Cost Realities

The guidance by the IT companies is expected to capture the unfolding reality to an extent, according to analysts.

“But until the end of the first quarter of 2008, one may not be absolutely sure how the rupee trend (against dollar) would pan out in 2008-09 and how dollar-denominated IT market would readjust to the emerging cost realities,” said an official with a domestic IT major.

Among the top counters, the fall in Satyam was the biggest at 0.91 per cent, followed by Infosys (0.83 per cent), TCS (0.58 per cent) and Wipro (0.09 per cent).

The average delivery ratio of around 60 per cent in these stocks suggested more of profit booking trend than trading activity.

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