The Hindu Business Line : IT stocks back in favour; Index gains 4.15%

Mumbai, Feb. 4 IT stocks, which had been the flavour of the market before their recent eclipse by infrastructure and other core sector stocks, are now back in favour on Dalal Street.

Their low levels have led to a renewed buying interest, and while the market sentiment is still sluggish, there seems to be a contrarian view as far as IT stocks are concerned.

The BSE IT index went up 4.15 per cent on Monday, while the benchmark index Sensex rose 2.29 per cent. Over the last week, BSE-IT has gained 11.96 per while the Sensex was up 2.80 per cent.

“The IT sector is attracting interest, as many investors who sold value stocks of other core sectors during the market fall of January 21, picked up IT stocks at lower levels,” said Mr Vishwas Agarwal, an independent analyst.

“The negatives had been factored into the prices of IT stocks in the last couple of weeks and the large-cap basket seems to be attractive to investors at these lower levels,” said Mr Ruchir Desai, analyst, PINC Research.

TCS was up by 5.03 per cent on Monday, Infosys Technologies up 3.24 per cent, Wipro up 6.16 per cent and Satyam Computer gained 3.85 per cent.

These stocks have gained substantially over the last week too, TCS rising 14.26 per cent, Infosys 13.56 per cent, Wipro 14.28 per cent and Satyam Computer 9.72 per cent.

As the sector was already beaten down substantially in the past couple of months during the US meltdown and the continuous rupee appreciation, these companies had already been de-rated, with PE levels substantially coming down, said analysts.

IT majors have indicated positive signals that the business growth is still strong, despite the US slowdown. The deal flows seem to be large and strong, said an analyst.

“The large-cap companies seem to have taken the rupee appreciation well in the last quarter and are indulging in confidence building measures,” said Mr Harjit Singh Sethi, Chief Executive, Almondz Global Securities.

“The downside risk is comparatively less in this sector as it is already priced at very low levels”, said Mr Vishwas Agarwal, an independent analyst.

Small-cap sizzles

The mid-cap stocks, and even some of the small-cap stocks in the IT sector seem to be doing well on the back of value buying by investors.

Educomp Solutions jumped 14.45 per cent, MphasiS was up 11.33 per cent, Rolta India up 23.68 per cent and Silverline Technologies was up by 4.97 per cent.

“Amongst the mid-caps those companies which have strong business models are bound to do well,” said Mr Sethi.

However, analysts say the final judgment is not out on these stocks yet. “With global conditions remaining so uncertain, the IT stocks might still see volatile times,” said an analyst.

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