Business Daily from THE HINDU group of publications
Tuesday, Sep 18, 2007
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Business Daily from THE HINDU group of publications Tuesday, Sep 18, 2007 ePaper |
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Stock Markets Info-Tech - Stocks Markets - Trends
Adith Charlie Mumbai, Sept 17 With concerns of a slowdown in the US economy resurfacing, Indian IT firms lost significant ground on the bourses in the last one week. Though industry pundits remain convinced of the long-term growth proposition of Indian IT firms, they believe that uncertain cues globally have prompted investors to temporarily reorganise their portfolios. On Monday, the BSE IT index fell 1.39 per cent to 4,387.26, while the CNX IT index fell by 1.47 per cent to 4,573.55. Even though experts do not believe that the US economy is on the threshold of a recession, fear in the investor community about the worsening housing slump and credit crunch decreasing discretionary IT spending globally has come as bad news for Indian IT companies. “Fund houses are of the view that a slowdown in the US economy will prompt global firms to become conservative in their IT budget, to withstand margin pressure. This could impact future earnings of Indian IT firms,” said Mr N.V. Shah, Director, NVS Brokerage. The US accounts for 25-60 per cent revenue for frontline IT firms, said an analyst from a Mumbai based brokerage firm. Now, fund houses and retail investors are placing their bets on sectors that promise short-term gains. “Investors have made a temporary shift from technology stocks to manufacturing stocks as they are available at cheaper valuations. These companies are now associated with visibility of earnings, growth and pricing power,” said Mr Vishwas Agarwal, technical analyst. Moreover, the appreciating rupee continues to further dampen sentiments. The rupee’s strengthening has exposed the lack of pricing power that Indian companies have with their clients, added Mr Shah. Though these companies are talking of a 3-4 per cent rise in new contracts to tide over the appreciating rupee, they are not able to negotiate on the existing contracts, he said. Thus, the markets do not expect IT companies to maintain a growth rate of 30-35 per cent in subsequent quarters. Industry pundits estimate that IT contracts of up to $60 billion will be up for renewal by 2008 in the US alone, presenting Indian IT firms with a tremendous business opportunity. Moreover, with stock prices tumbling, the IT sector would become very cheap in terms of valuation for investors to enter them from a long-term perspective, according to Mr Shah. Most of the top losers on the BSE Sensex today were IT firms. TCS fell by 2.47 per cent, Satyam by 1.97 per cent and Infosys by 1.35 per cent. More Stories on : Stock Markets | Stocks | Trends
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