The Hindu Business Line : Satyam’s loss is others’ gain

Mumbai, Jan. 7 IT stocks were hit on Wednesday as Satyam Chairman and promoter Mr Ramalinga Raju admitted to a Rs 7,000-crore fraud in the company’s balance sheet, sending the market sentiments for a toss.

BSE-IT was down by 9.32 per cent, while CNX IT was down by 5.32 per cent.

The Satyam episode will dent the image of any fast-growing Indian company, said Mr Saurabh Mukherjea, Head of Equities, Noble Group. Suspicion will grow against Indian companies, who have tried a number of methods to meet market expectations, and were seen as darlings of the market, he added.

Before the Satyam-Maytas episode, IT stocks were getting hammered and with this recent incident, it appears as if the “IT services’ India story” is over, said Mr Mukherjea.

“In short term, we expect Satyam’s accounting fraud to increase woes for the Indian technology sector, which is already facing a growth slowdown and political opposition due to recession and rising unemployment in the US & Europe. We believe that clients would increase their due diligence while choosing India-based IT services vendors for projects,” according to Religare Hichens Harrison.

IT-bellwether TCS was down by 0.78 per cent, while Infosys was up by 1.67 per cent and Wipro up by 0.23 per cent.

Among the IT stocks that fell substantially were Aptech Ltd, which fell by more than 24 per cent, HCL Technologies (15 per cent), Moser Baer (13 per cent), NIIT Ltd (17.45 per cent) and Tech Mahindra (more than 14 per cent).

Many marketmen said that what is Satyam’s loss could be others’ gain.

“The issue of corporate governance will definitely affect IT stocks now. Companies such as Infosys, Wipro and TCS will get re-rated now as the clients of Satyam will look at migrating to these companies, which have a good order book and cash balance,” Mr Alex Mathew, Head of Research at Geojit Financial Services, said.

One company’s fraud is not enough reason to say that the whole pack is bad, said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets.

In fact, to some extent, the clientele of Satyam might shift to other IT companies, she added.

Of the 14 (IT) stocks, only two (Infosys and Wipro) advanced and the rest declined on the BSE.

Most top-rung IT companies are high on corporate governance and to that extent it will not affect the IT stocks, said Mr Dipen Shah, VP-Private Client Group, Kotak Securities Ltd.

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