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War cries trigger meltdown

Krishnan Thiagarajan

THE after-effects of the terrorist attacks at the World Trade Centre and the Pentagon continued to dampen market sentiment at the Indian bourses.

The iron clad resolve of the US to hunt down the terrorists in a ``sweeping, sustained and effective'' campaign literally put the world on a war alert.

After a 11.5 per cent decline in the BSE Sensitive Index, the Sensex closed again on Monday, down 5.27 per cent to settle at 2681 points.

The huge selling pressure from offshore funds fearing a war and its negative repercussions appear to have triggered the meltdown in the Indian markets. All the measures introduced by SEBI to curb excessive fluctuations in prices such as tightening market wide index circuit filters and circuit filters in individual stocks have worked only to a certain extent.

For the markets, which has had hardly anything to cheer about, the only positive signal, if it all it emerges, will come from the NYSE which is to open on Monday after a four day closure. The four-day closure in the wake of the terrorist attacks has been the longest closure of the US stockmarkets since its closure in the 1930's.

In the Indian markets, the software sector which was already caught in a bear trap, the terrorist attacks have further compounded the uncertainty surrounding the sector.

As if to precipitate matters and add to flurry of revenue/earnings downgrades in the software sector from frontline companies such as Infosys, HCL Technologies and NIIT, Hughes Software Systems was the latest to join the downgrade bandwagon.

Despite the telecom meltdown and its catastrophic effects around the globe, the company seemed to have been riding fairly strong with a string of alliances, comfortable order book and good visibility in its earnings flows.

But finally it has also fallen prey to the sharp drop in telecom spending, sharply cutting its income growth forecast for 2001-02 to 25-35 per cent from 55-60 per cent. A careful assessment of the statements emanating from the company seems to indicate t hat the overall economic environment deteriorated in the last 30-60 days, but actually the telecom environment turned murky at least by early April/May.

So, for a company, which had visibility in its revenue streams at the announcement of the first quarter earnings performance in July, the sharp deterioration income growth is alarming, to say the least. The stock which has been on a steady decline for th e past month or so, experienced its sharpest decline on Monday's trading.

The stock declined by 20 per cent (Rs.74.60) to close for the day at Rs. 298.65.

However, for the software sector starved of good news, the announcement by Mascot Systems that it had bagged orders worth $40 million, including a $25-million contract from a Fortune 1000 company, $15-million annuity contract from a large MNC and $1.2 mi llion from a leading technology company lifted sentiment, but only fleetingly. The stock appreciated from around Rs 80 to a high of Rs 100 last week, but it slipped back sharply, close to its earlier fortnight levels.