The Hindu Business Line : IT stocks gain, thanks to Infosys’ strong show

Mumbai, April 15 Led by better-than-expected guidance for FY09 by the IT bellwether Infosys Technologies, other IT stocks too gained on Tuesday. The BSE IT index moved up 5.5 per cent, registering the maximum gain among the sectoral indices. The Infosys scrip touched a high of Rs 1,525 during the intra-day trade, after the company announced its fourth quarter results and raised the annual dividend for the current fiscal to 30 per cent of company’s net profit, from 20 per cent in the year just ended.

The Infosys stock finally settled more than 6 per cent up from the last trading close, at Rs 1,510.80 on the BSE. However, the stock still trades much below its 52-week high of Rs 2,140. The weaker global economic outlook, particularly the negative news coming from the US, which is the largest market for Infosys; and the strengthening of the rupee against the US dollar have had an adverse impact on the stock, which had touched a low of Rs 1,212 on the BSE on January 20 this year.

Market volumes

Commenting on the Infosys numbers, Mr Sanjay Prakash, CEO, HSBC Asset Management Company, said: “The FY08 numbers were bang on target and the FY-09 guidance is at the top end of what the market expected, which led to genuine buying and short covering, resulting in a price rise in the scrip.”

The cash market volumes went up sharply, by around 50 per cent on the NSE, where more than 45.5-lakh shares worth Rs 679.60 crore were traded. On the BSE, 11.6-lakh shares worth Rs 172.97 crore changed hands.

“Open interest in Infosys shares, which was 45-lakh shares on Friday, came down by 14 per cent on Tuesday, which indicated an element of volatility in the scrip,” observed Mr Sanjay Prakash. Since the Infosys results were better than what market expected, the other IT company stocks too moved up in anticipation, he added. The country’s biggest software exporter TCS Ltd moved up by 7.37 per cent. The other IT biggies that gained were: Wipro (4.52 per cent), Satyam Computer (4.35 per cent), HCL Technologies (6.78 per cent), Patni Computers (6.28 per cent), i-flex (3.91 per cent), Tech Mahindra (3.87 per cent), NIIT Ltd (2.71 per cent), MphasiS Ltd (7.10 per cent), and Hexaware Technologies (6.31 per cent).

Yearly guidance

“Infosys’ FY-09 US dollar revenue growth guidance and earning per share (EPS) growth guidance of 19-21 per cent and 16-18 per cent respectively are broadly in line with consensus estimates. We believe that the growth could be back-ended and Infosys will modify its yearly guidance upwards as we progress ahead in FY-09,” said Mr Harshad D. Deshpande, IT analyst with Religare Securities. “However, the Q1FY-09 US dollar revenue growth guidance is flat and the EPS is expected to decline QoQ by 2.8 per cent in Q1FY-09. We see lower volumes and higher pressure on prices. This will keep the company’s performance muted over the next two quarters,” Mr Deshpande said.

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