IT stocks on fast track

Despite a rising rupee, which touched a nine-year-high, shares of software companies were the biggest gainers on Wednesday after investors started buying at these counters, judging that the recent fall in the prices was more than warranted.

The BSE IT Index, which shot up by 3.8 per cent, was the biggest gainer among all indices.

No other index gained more than 1.5 per cent with the exception of the BSE Teck Index (which has IT companies as its components).

Analysts said the announcement that the Infosys board, which is meeting on October 11 to consider the quarterly results, would also consider an interim dividend, buoyed purchases at all software companies' counters on expectations of better-than-expected July-September results from the IT bellwether.

Infosys Technology (up 3 per cent to Rs 1,824.30), Tata Consultancy Services (up 3.88 per cent to Rs 1,041), Satyam Computers (up 4.81 per cent to Rs 431.30) and Wipro (up 4.33 per cent to Rs 454.60) were the major gainers.

Analysts said the stocks had gone down much more than warranted on concerns that the rupee, which gained 11.6 per cent this year, would bring down profits of software companies.

The fortunes of the IT sector have closely tracked the rise and fall of the rupee till now, with the BSE IT index falling by nearly 16.15 per cent this year, even while the broader market went up to scale new peaks.

"IT stock valuations look very attractive now. When the rupee started appreciating, IT stocks were battered very heavily. Moreover, with Wipro bagging the $130 million order from UK utility Thames Water and private equity deal happening in Patni Computers, there has been a flow of news in the IT space," said Rishi Maheshwari, IT analyst, Networth Stock Broking.

However, analysts also say that there has been no major news in the IT sector and whatever rise they are seeing is the result of short-covering ahead of the futures and options expiry on Thursday.

Though IT companies have increased billing rates by 3-5 per cent, analysts are deferring to take a sectoral call till after the second quarter results. Foreign institutional investors and hedge funds were also not buying IT stocks at this stage, said an analyst at a local brokerage.

Chidambaram's statement on Wednesday in New York stating that the government was "concerned" over the rapid appreciation of the rupee against the US dollar and the central bank may have to intervene if there is "disorderly movement" in the exchange rate provided some respite for the IT sector.