Riding the crest of the exports wave, software stocks clocked a massive 180 per cent-growth in market price during the last six months. The performance is commendable when compared with that of the 30-scrip Sensex stock which fell marginally by 0.4 per cent during the last six months.
The Business Standard software index moved up from 100 on Jan 31 to 282 on the last day of July 98. During the same period Sensex moved down marginally from 3,211.31 to 3,224.36 on Jan 31, 1998 Software stocks have a reason to grow. While most of the other manufacturing companies have performed dismally in the past few years, software companies have been consistently showing growth in sales and profits. Following a 50 per cent growth in net profit during 1996-97, software companies have sustained the same growth rate in 1997-98, too. Early trends for 1998-99 indicate that software companies are likely to clock more than 50 per cent growth in net profit in the current year.
During the current rally, small as well as big software stocks gained impressively and touched all-time highs. For example, the market price of little known Innovative Software moved up from 80 paise in January 31 to Rs 8.75 on July 31, 98 -- a gain of about 1,000 per cent in the last six months. BFL Software, which has been in the news because of takeover by Barings India Investment of the ING Barings, gained 629 per cent to Rs 441.25.
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Among the big names, Wipro gained almost 300 per cent to Rs 1,977, Infosys Technologies appreciated by 142 per cent to Rs 2,612.50, Tata Infotech zoomed 146 per cent to Rs 1,499.50, Satyam Computers surged up by 206 per cent to Rs 509.25 and Pentafour Software went up by 272 per cent to Rs 642.50.
The software stocks which were not in the reckoning too gained substantially. DSQ Software zoomed by 445.7 per cent, R S Software appreciated by 383 per cent, KLG Systel jumped 196 per cent, Rolta India climbed 195 per cent, Software Solution went up by 183 per cent, Silverline Industries surged 175 per cent, NIIT was up 115 per cent, Sierra Optima 106 per cent, Leading Edge 100 per cent and Aptech showed a rise of 60 per cent made during this 'boom'.
Jigar Shah, an information technology analyst at K R Choksey Share and Securities, says" The runaway boom of software scrips in India can be compared with such a rally in software scrips in the US." He says the current software rally has been performance-related. Software players are experiencing high growth on account of the year 2000 (Y2K) business and better margins as companies emphasise on on-site software development for exports.