The Hindu Business Line : Infosys lifts entire sector's morale

All frontline IT stocks - TCS, Wipro, Satyam Computer and HCL Technologies - and a majority of mid-cap IT firms such as i-flex Solutions, Hexaware, MphasiS, Prithvi Information Solutions and Infotech Enterprises rose as investors felt that the sector may take a leadership role on the stock markets from here on.

During the recent bull phase, the sector had not participated after investors felt that there could be a sharp decline in IT spending by corporations due to a possible slow down in the global economy.

"The Infosys results were beyond expectations of the most bullish of earnings estimates. We believe that all frontline IT stocks will do well at least this quarter," said Mr P Phani Shekhar, IT analyst with Angel Broking.

Foreign brokerage UBS said it continued its `buy' recommendation on Infosys after the strong Q1 results. "The leadership position on the markets will shift to IT sector during this quarter," said an analyst with another foreign brokerage house.

Adds another analyst with Batlivala & Karani Securities: "After the strong Q1 results by Infosys, the entire sector is likely to witness a re-rating on the back of the excellent performance by the IT bellwether."

However, Mr Shekhar of Angel Broking said there was "no headroom" for a secular re-rating on the frontline IT stocks. In the mid-cap IT stocks, there was room for a re-rating with an "upward bias" in the short-term.

Prithvi Information System and Infotech Enterprises are the top picks in the mid-cap sector by Angel Broking. Shares of Prithvi Information System rose 6.74 per cent to Rs 313.60 while Infotech Enterprises gained by 5.37 per cent to Rs 534.25 on the BSE.

Mr Shekhar said iGate and Patni Computer Systems, however, are expected not to do well, as they felt both these companies have a "fundamental problem in the way they have structured their business."

Shares of iGate Global, which came out with lower than expected Q1 results, fell 6.61 per cent to Rs 183 while Patni Computer Systems was lower by 3.57 per cent to Rs 301.55, despite good performance by IT companies on stock markets on Wednesday.

The BSE-IT Index rose by 6.27 per cent during the day on the back of Infosys results. TCS ended higher by seven per cent at Rs 1,892.95, Wipro by 4.21 per cent to Rs 516.95 and Satyam Computers closed at Rs 750.65, up 4.39 per cent.

Among the mid caps, I-flex rose by four per cent to Rs 1,281.55, Hexaware by 7.40 per cent to Rs 147.30, HCL Technologies by 9.45 per cent to Rs 557.20 and MphasiS ended at Rs 145.20.

ADRs shine

Meanwhile, ADRs of Indian companies witnessed strong surge in values despite a weak US market. While Infosys was leader there too , almost all the other Indian counters were in the green.

Infosys was trading at $82.71, a gain of 6 per cent, over the previous day's close while Saytam and Wipro gained 3.3 per cent and 4 per cent respectively. However, the lone loser was Patni Computer, which slipped by 2.6 per cent.

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