Analysts bearish on tech stocks

STOCK REPORT

After having underperformed the markets for the last few months and seen a major selloff on Thursday, the technology stocks were back in favour on Monday on the back of a better-than-expected guidance by Infosys.

The BSE IT index, which had plunged 5.3 per cent in two days, gained nearly 6 per cent on Monday.

The gainers were led by HCL Technologies (up 7.88 per cent to Rs 632), Allsec Technologies (7.42 per cent to Rs 260), Satyam (7.23 percent to Rs 828), Infosys Technologies (6.94 percent to Rs 3230), Geometric Software (6.65 percent to Rs 122.65) TCS Ltd (5.94 percent to Rs 1903) and Wipro (up 4.88 per cent Rs 540.50 Analysts, however, were not impressed by the gains and cautioned investors against reading too much into Monday's rally.

Pankaj Karde of India Infoline says " There seems to be a change in the outlook towards the technology sector after the Infosys' robust earnings guidance, though the quarterly results were not as per expectations. No doubt many stocks in the sector have done well but the rally may not sustain for long,."

However, the IT sector stocks have underperformed the Sensex and the BSE 100 by a long-shot this year.

While the Sensex put on nearly 22 per cent this year, the IT index had barely notched up a 5 per cent gain before Monday's surge. With Monday's 6 per cent jump, the gains made by the IT index is still half that of the Sensex.

IT stocks have been oscillating above and below the Sensex for the last one year, with a change-over from an underperformer to an outperformer, nearly every quarter.

Besides the good guidance and bonus issues, investors are also banking on the sector to help them survive an overheated market, analysts said.

The BSE Teck index, which also included associated sectors like media and communications, also rose by 4.8 per.