IT Stocks lead the Show

Thursday, April 17, 2008 | | |

Export-driven technology stocks continued to march northward for the third straight day Thursday. Infosys' FY09 guidance has revived investor interest in this sector.

In the last three days alone, the BSE IT Index has gained as much as 13 per cent with Sensex constituents Infosys, Tata Consultancy Services, Wipro, Satyam Computer Services and HCL Technologies gaining 6-10 per cent.

This is because, even now this sector continues to hold consistent growth prospects, analysts said.

“It is quite heartening that Infosys has managed to deliver decent results and guide 19-21 per cent revenue growth for the forthcoming year, even with the fear of a crisis looming in the US. This offers some comfort to smaller mid-sized companies,” said Anita Gandhi, head of institutional business at Arihant Capital Markets.

The weak global economic outlook, particularly for the US which is the largest market for IT players, and the strengthening of the rupee against the dollar have had an adverse impact on IT stocks for over a year now with the BSE IT Index losing 17.2 per cent.

Gandhi added that mutual funds' exposure to the IT sector is expected to build up as fund managers are finding greater value in these stocks.

“After IT stocks lost their charm, people flocked to capital goods, driving their prices ahead of valuations. As of now, most IT stocks are available at prices that are one-third that of capital goods stocks,” she said.

Interest in small and mid-sized companies in this sector also revived today on reports that the prime minister is willing to consider extending the concession on Software Technology Parks of India.

Hexaware Technologies, Rolta, i-flex Solutions and Sonata Software today rose 4-8 per cent on the news.