The Hindu Business Line : Only large-cap IT stocks gain on Infosys results

Mumbai, July 10 Better-than-expected first quarter numbers from Infosys pushed up the other two large-cap information technology stocks, but the company’s conservative guidance for FY-10 led to a sell off in the mid- and small-cap IT stocks, said analysts.

The BSE IT index rose 2.12 per cent, but it was only the three Sensex stocks – TCS, Infosys and Wipro – in it that drove it into positive terrain.

Infosys was up 2.97 per cent at Rs 1,726.5, Wipro gained 3.37 per cent at Rs 384.7 and TCS rose 1.56 per cent at Rs 394.65.

Infosys cut its revenue guidance for FY10, saying its consolidated earnings could be expected to decline by up to 1.3 per cent in the current fiscal. “If a large company like Infosys has cut its guidance, investors are very wary of smaller IT companies and how their earnings will be affected going forward,” said Mr Rajesh Zawar, Assistant-Vice President, Institutional Equity Research-TMT Group, Antique Stock Broking.

Infosys’ fall in employee count and its warning that billing rates may fall by 5 per cent also increased investor wariness about smaller IT stocks.

“The company said that it expects billing rates to fall around 5 per cent till March 2010 as its overseas clients are dealing with a slowing economy. This will be a bigger challenge for the smaller IT companies,” said an analyst.

Aptech was down 3.54 per cent, Financial Technologies fell 3.99 per cent, Moser Baer lost 3.27 per cent, NIIT shed 8.12 per cent and Tech Mahindra was down 6.29 per cent.

With respect to the blue chip IT stocks that rose, analysts said they expected those companies to do well now that Infosys has produced better than expected results.

The net profit of the IT bellwether jumped 17 per cent for the quarter ended June 30 over the same year-ago quarter.

JP Morgan in a research report said it expected similar first quarter results from the other large IT companies on whom it remained positive.

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