The Hindu Business Line : Wipro drags IT down

The BSE IT index dipped 3.8 per cent on Monday and was one of the worst performing sectoral indices on the exchange. Wipro was the worst performing scrip in the Sensex pack, as it fell 9.30 per cent to Rs 227.35. TCS dipped 4.46 per cent and Infosys fell 3.22 per cent.

Satyam Computer Services, however, gained 44 per cent, registering an intra-day gain of 67 per cent, on the appointment of a new board by the Government. “The board members are very well experienced and people feel that they can chalk out a rescue plan for Satyam,” said the head of research at a broking firm.

It touched a high of Rs 40 during the day and closed up 44.23 per cent at Rs 34.4.

“The reason why Satyam shares were up on the cash market was because investors were squaring off their short positions in the derivatives segment. It would not be available for trading in the F&O segment from January 29.,” said a derivatives analyst.

Of the 13 stocks on the BSE IT index, 12 declined. Shares of Wipro and Megasoft were down between 12 per cent and 13 per cent during the day.

The only company in the index that gained was Moser Baer. The BSE-IT index has fallen 12.31 per cent in the last one week.

“Investors will be ultra-cautious now about investing in IT services stocks. Even without the Satyam debacle, given the global headwinds of demand destruction in Western end-markets, a number of investors had become sceptical about IT services stocks. After this episode investors will become even more wary of the IT services story in India and elsewhere,” said Mr Saurabh Mukherjea, Head of Equities at Noble’s India Research.

Wipro was barred by World Bank for four years beginning June 2007 for “providing improper benefits to Bank staff”. Megasoft was barred for four years beginning December 2007 for “participating in a joint venture with Bank staff while also conducting business with the Bank”.

Mr Alex Mathew, Head of Research at Geojit Financial Services, said that the large-cap IT stocks will be hit less than smaller companies.

“The large companies have huge cash reserves, unlike the small companies, and can manage better in case big orders do not come through. Their debt-equity situation is also quite good,” he said.

“The IT industry will face a tough time till about FY-10. The short-term does not look too good for these companies,” said Mr Harit Shah, IT analyst at Angel Broking.

SATYAM F&O

Monday was the first day of trading after Satyam was removed from the major indices of the BSE and NSE.

On Friday, NSE announced it would exclude Satyam from the derivatives segment as well from January 30. Open interest in Satyam was down 17.19 per cent at 1.94 crore and it closed up 43.42 per cent at Rs 34.35.

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