IT Stocks Outlook: Investors to remain on sidelines next week

[K.Karthik Raja]

IT Stocks Outlook: Investors to remain on sidelines next week
Friday, Mar 14

MUMBAI - Information technology shares are seen moving along with
the broad market as uncertainty prevailing in the sector continues to
keep big investors on the sidelines.
While on one hand there is negative sentiment as companies are
increasingly hawkish about clients' spending in 2008, the relief from
the
recent fall in the rupee against the dollar is also limited.
Trading volumes in IT shares have hit their lowest level since
September. Open interest in the IT stock futures is low and has
remained nearly stagnant.
In the 11% fall in Nifty futures since end-Feb, technology shares
have contributed 1.54%.
Relatively, futures and shares of Satyam Computer Services, and
HCL Technologies are likely to hold out better than others, as they
are at more advantageous technical positions.
.
FACTORS AT PLAY
The rupee, which seemed to have stabilised around the 39.30 rupees
per $1 level towards the end of December, has now dropped to 40.44
rupees, despite two interest rate cuts by the U.S. Federal Reserve.
The U.S. economy, however, continues to be under recession fears
after retail spending fell in February, analysts said. More data
showing decline is expected.
Standard & Poor's Thursday said the U.S. credit crisis was drawing
to an end. However, the report said over half the losses had already
been stated, implying that significant losses would still be revealed
in the coming months.
What fate IT companies would face as a result of that is still to
be known. While all the large Indian IT exporters agree that client
budgets are around the same level in 2008 as 2007. They also say that
allocation for spending may differ this year.
A number of IT exporters, including Tata Consultancy Services,
MphasiS and Polaris, have also witnessed diffidence in clients' actual
spending.
Clarity is likely to emerge only after Infosys Technologies
declares its fourth quarter result and issues guidance for 2008-09
(Apr-Mar) on Apr 15, Most analysts expect the company to report 20-22%
revenue growth and around 15% profit growth, due to pricing pressure
and increased tax liability in the coming years.
Some sceptics have lowered earnings per share growth estimates to
single digits.

Week-on-week closing prices of key software shares, in rupees, on
National Stock Exchange:

Company Mar 14 Mar 7 Change
(in %)
HCL Technologies 265.45 273.40 (-)
(2.9)
Infosys Technologies 1,370.20 1,430.55 (-)
(4.2)
Satyam Computer Services 378.70 419.90 (-)
(9.8)
Tata Consultancy Services 803.85 846.15 (-)
(5.0)
Wipro 369.30 416.80 (-)
(11.4)
.
INDICES

CNX IT Index 3,530.70 3,762.05 (-)
(6.1)
NSE Nifty 4,745.80 4,771.60 (-)
(0.5)
BSE Sensex 15,760.52 15,975.52 (-)
(1.3)

K.Karthik Raja