Tech stocks stage recovery

Krishnan Thiagarajan

After a turbulent year for the Indian markets since last Deepavali, Samvat 2058 based on the Hindu Vikram Samvat calendar, this Deepavali began on a much more cheerful note. Ironically, the technology stocks, specially software service stocks which contributed to the sharp plunge in the BSE Sensex over the past year were the ones which staged a resurgence in the course of this week. Almost across the board, the technology stocks of all hues and colours - frontline, second rung and momentum stocks led the rally of the overall market. While the BSE Sensex surged by 3.3 per cent (or 101 points) to close for the week at 3180 points, the S & P CNX Nifty was up 3.2 per cent (or 32 points ) to settle at 1004 points.

A combination of developments on the international and domestic front appear to have stoked the positive sentiment in the markets. Earlier in the week, the crushing of the Taliban and the entry of the Northern Alliance into Kabul, a wildly successful outcome for the US in such a short time frame was a shot in the arm for the markets. In the light of this favourable development, on November 13, the Dow Industrial Average surged to the early September levels (prior to the September 11 attacks on New York and Washington), while the Nasdaq Composite Index also soared to a two-and-a-half month peak. Besides, the relative success of India at the World Trade Organisation bolstered the positive sentiment at the bourses.

DOMESTIC MARKETS : The trading activity during the course of this week was dominated entirely by frontline/ second rung software stocks and momentum stocks from the convergence triad. Among frontline stocks, the wave of buying was triggered by Infosys Technologies, which soon spread to other majors such as Wipro and Satyam Computers. The second rung stocks have been attracting feverish trading activity over the past couple of weeks, largely driven by their attractive valuations. This week too was no exception to this trend. Led by the likes of Polaris Software, Trigyn Technologies, Mphasis BFL, Mascon Global, Sonata Software (despite profit warning) and Aftek Infosys, the second rung stocks continued to attract investor fancy.

At the same time, the momentum stocks (the so called Ketan Parekh favourites) such as HFCL, Global TeleSystems, SSI, DSQ Software, Pentamedia Graphics, Satyam Computers, Zee Telefilms and Sterlite Optical.

Besides this, most of the uptrend in other stocks was on account of company specific developments. The VSNL (Videsh Sanchar Nigam) stock weakened this week in the light of the announcement of "open competition" in international long distance services by the Telecom Regulatory Authority of India. The LCV and HCV majors - Tata Engineering and Ashok Leyland spurted this week on a sharp improvement in commercial vehicle sales in the month of October. Similarly, the proposed divestment of a 51 per cent equity stake in two stages by the government in IPCL sparked off lively activity in the stock. The auto stocks such as Mahindra & Mahindra, Punjab Tractors, Hero Honda and LML continued to enjoy market fancy this week.