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Small IT stocks surge on hopes of good quarterly numbers

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BS Reporter Mumbai

Shares of small and mid-sized information technology (IT) companies skyrocketed on Monday, for no very clear reason. The stocks of these companies climbed between four and 20 per cent, even as the Bombay Stock Exchange’s benchmark Sensex and IT indices closed with losses.

The Sensex closed at 15,814.72, down 0.2 per cent. The BSE IT index closed at 5,881.8, down 0.1 per cent.



IT bellwether Infosys Technologies is to announce its third quarter numbers on Thursday.

Subex Ltd gained the most at 19.4 per cent, followed by Prithvi Information Solutions, which climbed 11.5 per cent. Cambridge Solutions, Mahin-dra Satyam and Aptech gained about eight per cent each. Most of these counters also saw a huge spurt in volumes.

 

Analysts attributed the rally on expectations of good results for the December quarter and narrowing of the valuation gap with frontline IT stocks. S P Tulsian, an independent market analyst, said: “The rally could be on the back of a narrowing of the valuation gap between small-cap and mid-cap stocks to their large-sized peers. The frontline IT stocks are expected to post a good set of numbers and there are expectations that these stocks will follow suit.”

The valuation gap of small and midcap IT companies with the frontline companies have widened substantially, Tulsian noted.

Analysts say most small companies are expected to report spectacular numbers on account of the rupee depreciation, as they leave their exposure unhedged.

“Normallly, when large-sized IT companies do well, the mid-caps do better. Similary, when the former perform badly, the latter do worse,” said an analyst with a foreign brokerage firm.

The rupee dropped 17 per cent against the dollar in 2011. During the December quarter, it fell a little more than six per cent.

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First Published: Jan 10 2012 | 12:12 AM IST

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