Infotech stocks fall by the wayside as investors make way for TCS

The technology sector stocks have started feeling the heat of the forthcoming TCS issue with funds and high networth individual investors (HNIS) reshuffling their portfolios to make way for the for the mega issue.

Frontline stocks like Infosys, Wipro and Satyam have witnessed early signs of sell off. Most of the counters were trading weak since the announcement of the TCS issue last week.

While these stocks witnessed a slight pull back in Tuesday' trading, with Wipro up 3.11 per cent to Rs 1,487.65, Infosys Tech up 1.76 per cent to Rs 5,084.35 and Satyam Computer up 2.12 per cent to Rs 292.05, they are still trailing below their closing prices of Thursday when TCS announced its IPO.

In two trading sessions prior to Tuesday's close, Satyam has been the biggest loser with the stock crashing 7.73 per cent from Rs 300.90 to yesterday's close of Rs 286.

Infosys crashed 5.27 per cent in last two trading sessions and Wipro crashed 5.35 per cent from Rs 1,479.50 to yesterday's close of Rs 1,442.75.

Market analysts attribute the fall in the tech stocks to the churning of portfolios by HINs and institutional investors.

Divyesh Shah, National head sales, Indiabulls said, "Investors don't want to increase their overall exposure in the software sector, so there will be churning to make way for the TCS IPO. Activities in the tech counter in the last two days indicate the early signs of institutional investors and HINs exiting from secondary market to buy the shares of TCS from the primary market."

TCS, being a leading software company, will attract good amount of interest but the money will come from new funds who have recently entered Indian markets, Divyesh added.

Overall, the TCS issue is a good development for the market as the entire tech sector will be re-rated after the issue get listed at the stock exchanges, opined most analysts.

Amitabh Chakraborty, head of research, Kotak Securities said, "TCS was out of the public domain over the years, but with the prospectus now being filed with the Sebi, the company's financial strength is known. The company's ROE and ROC are more attractive. So investors are making way to include TCS into their portfolio.

The second-rung tech companies also have witnessed selling pressure amid overall bearish trend in the market. Second-rung tech stocks such as Onward Technologies, SSI, PSI Data Systems, iGate Global Solutions, MphasiS BFL, CMC, DSQ Software were the major losers.