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Our Bureau

Mumbai, Nov. 4 Failing to participate in the relief rally of the equity market on Tuesday were the IT shares, which appeared to track the US elections more than the market trend.

The BSE IT index was the worst performing sectoral index as it ended the day down 4.33 per cent from its previous close.

The main the reason for a dip in these shares is the US Presidential elections, said analysts.

“Weakness was seen in IT on fears that Mr Barack Obama may win the US presidential elections. He is known to be for (in favour of) curbing outsourcing,” said Mr P.K. Agarwal, President-Research, Bonanza Portfolio.

The appreciating rupee was also cited as one of the reasons for investors staying away from IT stocks, said analysts.

The rupee has appreciated to Rs 47.69/71 against the US dollar from 48.66.

Investors fear that if Mr Obama won, it would mean bad news for Indian BPO firms and the IT industry on the whole.

But marketmen believe that this would not pose a threat to the IT industry here.

“It is notional, if indeed Obama does get elected as the next American president, his putting a break on outsourcing does come as a threat. It is this sentiment that has led to people selling the IT stocks,” said an IT analyst with a stock broking firm.

“In the backdrop of the slowing US economy and exposure of the Indian IT companies to the US and European BFSI domain, we expect the Indian IT companies to face the headwinds in terms of slowdown in the volume growth and pressure on the pricing in short to medium term. Though the rupee depreciation has helped maintain earnings growth, future volume expectations’ will dominate the sentiment on the street,” a recent India strategy report from Ambit Capital said.

On Tuesday eight of the 12 shares in the IT index declined. Satyam, TCS, Wipro and Infosys were the biggest losers among the 30 Sensex shares.

Satyam closed down 7.41 per cent at Rs 277.85, TCS down 7.38 per cent at Rs.508.2, Wipro down 4.8 per cent at Rs.263, and Infosys down 3.32 per cent at Rs.1332.75.

On Monday when the Sensex gained 550 points, the IT index closed flat.

“Weak revenue growth for end customers, billing rate pressures and long sales cycle are to affect the sector. A weakening macro environment and an anticipated slow recovery in the US economy will lead to an immediate term slowdown for the Indian IT. Most of the larger Indian IT companies will go to the lower management guidance in FY-09,” Ambit Capital report added.

The other IT shares that ended the day in the red were HCL which was down 4.18 per cent, Mphasis 7.48 per cent, NIIT 1.32 per cent, Rolta 2.86 per cent and Tech Mahindra 4.2 per cent.

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