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IT sector: Positive signals

Sowmya Krishnan

MANY top companies in the new economy as well as old economy sectors have come out with their results for the June quarter. Surprisingly, top IT companies has posted good results as against market expectations.

Though the growth is moderate compared to their performance in the past, the growth rates, when seen in the light of the ongoing slowdown in the tech sector, have sent positive signals. Most of the software stocks such as Infosys Technologies, Wipro and Satyam appreciated in value after the announcement of the results and have managed to remain more or less steady over the fortnight.

However, the share price of NIIT took a heavy beating at the bourses after it announced a sharp dip in its profits. The company's net profit for the quarter stood at Rs 5.29 crore, 93 per cent down from the net profit for the corresponding quarter in the previous year at Rs 78.02 crore. The poor performance is attributed to the uncertainty in the tech sector that affected its education business. The stock lost almost 36 per cent of its value during the fortnight. It is currently trading at the level of Rs 318.

Among the old economy companies, the results for Tata Engineering were disappointing. Tata Engg had posted a huge loss of Rs 500.34 crore for the year 2000-2001. Apart from slowdown in the automobile sector, the fall in its market share could also be a c ause of concern for the company. The share price of Tata Engineering has managed to stay firm at around Rs 215-220 levels over the past three months and over the fortnight was up by around 12 per cent.

After a consistent decline in sales figures of commercial vehicles for the past few months, the off-take for June has increased by 38 per cent and 32 per cent compared to April and May 2001 respectively. This could infuse some positive sentiment in the a utomobile stocks. The share price of Ashok Leyland, the major competitor for Tata Engg has also remained firm at around Rs 55.

The general slowdown in the economy has also affected Tata Steel. The net profits of the company declined by 80 per cent for the June 2001 quarter. It lost around 22 per cent of its value over the past couple of weeks and over 30 per cent this year.

Cement companies such as Larsen & Toubro and ACC have posted impressive growth for the year 2000-2001. The growth was on the back of high prices as volumes remained flat during the period. The mega road project coming up could improve the prospects for i nfrastructure companies such as cement and steel. In this back drop, the share price of L&T ruled firm at Rs 215.