The Hindu Business Line : IT index bucks the trend

Mumbai, Feb.11 Even as stock markets tumbled after the dismal listing of Reliance Power on the bourses today, investors in frontline IT stocks were spared of the jitters.

While the benchmark index Sensex fell by 4.78 per cent. the BSE-IT index was the only benchmark sectoral index that bucked the trend to close with a gain of 0.13 per cent on Monday. All other sectoral indices ended in the red including BSE-Oil & Gas which fell by 7.07 per cent, BSE-Power (8.61 per cent), BSE-Realty (6.29 per cent), BSE- PSU (6.05 per cent) and BSE-FMCG (5.60 per cent).

Positive cues

Market men say that IT stocks have taken positive cues from the December quarter numbers declared by the Nasdaq- listed IT company Cognizant Technologies Solutions and the subsequent guidance provided by the company.

The company has predicted a revenue expectation, which is above the street expectation by around 38 per cent. The guidance assumes significance as Cognizant (which ends its fiscal year in December) is the first company to provide an outlook for the next fiscal year.

“As this sector has taken a big hit in last couple of months, Cognizant`s forward-looking statements have come as a comforting factor at these market levels”, said Mr Ruchir Desai, analyst, PINC Research.

Four gainers

However, it was a narrow based gain for the IT Index as 11 IT stocks declined while only four advanced. However, the four gainers were industry majors such as TCS, Wipro, Infosys and Satyam who logged gains of up to three per cent

Another section of analysts believe that it is just a short-term bounce back induced by a marginal rupee depreciation and value buying at lower levels.

Less risk

“The correction in the IT sector has already taken place and it is not likely that it will go below these levels. In a falling market, the IT sector is gaining a lot of investor attention as valuations seem attractive,” said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets. Investors believe that parking funds in fundamentally strong IT stocks is a less risky proposition, compared to other core sectors in a choppy market, said Mr Vishwas Agarwal, independent technical analyst.

The rupee – whose appreciation was a major pain point for the IT industry – has depreciated by almost one per cent in the past couple of weeks .

“As the IT sector tracks the rupee dollar movement, key stocks are witnessing an upward movement”, said Ms Shahina Mukadam, Head of Research, IDBI Capital Market Services Ltd.

Moreover, most market observers unanimously feel that the pessimism of IT sector over growth concerns have been answered to some extent by good results given by most IT companies during the previous quarter. This has also contributed to the current spike, analysts feel.

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