Tech stocks recovered on Thursday after witnessing a weak-to-subdued trend over the last few sessions as hopes and expectations over the budget seem to vacillate each day.
Software bellwether Infosys Technologies (up 1.5% to Rs 4,151), Digital GlobalSoft (up 2% to Rs 614.40), Wipro (up 1% to Rs 1,413) and Satyam Computer (up 1.1% to Rs 220.85), all moved higher. Volumes on these counters, though, were modest with the otherwise highly traded Satyam Computer notching just 1.6 million shares 130,000 shares changed hands in Infosys Technologies.
Among second line IT shares, Subex Systems (up 4.9% to Rs 101.75), Onward Technologies (up 4.6% to Rs 26.95), Mascon Global (up 3.8% to Rs 15), Geometric Software (up 3.1% to Rs 466), Mascot Systems (up 3.6% to Rs 119.40), Nucleus Software (up 3.6% to Rs 82.90), R S Software (up 3% to Rs 25.90), Sonata Software (up 2.8% to Rs 14.60), Mastek (up 2.2% to Rs 557.90) and KPIT Infosystems (up 2% to Rs 175.50), also made significant headway.
Some techs were in the limelight on specific developments. These included Hughes Software (up 4% to Rs 158), i-flex Solutions (up 3.7% to Rs 835), Ramco Systems (up 9% to Rs 531) and CMC (up 1.3% to Rs 495).
Dealers say buying interest materialised in stocks like Digital GlobalSoft. On Wednesday, buying interest surfaced in early trades in Satyam Computer, Digital GlobalSoft and Mastek. But as buying by funds got exhausted in early trades, these came off their higher levels later in the day.
Today's recovery in tech stocks comes amid market talk that the budget may not prove overly negative on the tax front for the software sector. Earlier, there were concerns that fresh taxes may be imposed on the sector. However, a major contributor to the weakness was concern over a US-Iraq war breaking out as the US and its allies presented a second resolution to the UN Security Council on Monday which implied action against the West Asian nation.
In the last one week to Wednesday, the combined market cap of 23 large software companies fell 3% to Rs 84083.20 crore (Rs 840.83 billion). The market cap remained almost unchanged in the last one month.
The IT sector hopes that the government may re-instate section 10A/10B benefits in the Union Budget. In the last budget, the then finance minister, Yashwant Sinha, had lowered the 100% deduction of export profits to units existing in software parks/free trade zones to 90%. The 10 A/10 B benefits are available for software units set up before 2010.
Meanwhile, large software companies are seen benefiting from the trend of outsourcing from global companies. Global companies are expected to increasingly outsource to India in a bid to reduce costs. Indian companies with competitive billing rates and proven ability are seen as major beneficiaries from this outsourcing trend.
The Nasscom survey for the first nine months (April - December 2002) revealed 28% growth in software and service exports. The total software and service exports from India during the nine months period were Rs 34,000 crore ($ 6.9 billion), up from Rs 26,600 crore ($5.6 billion) in the corresponding previous period. While IT services exports were up 20% to Rs 25,800 crore (Rs 258 billion), ITES revenues climbed 61% to Rs 8,200 crore (Rs 82 billion).
For FY 2002-03, Nasscom had forecast a growth of 30% in revenues to Rs 47,500 crore (Rs 475 billion). Out of this, IT services were expected to clock a growth of 21.8% to Rs 35,800 crore (Rs 358 billion) and ITES services were expected to experience a growth of 64.8% to Rs 11,700 crore (Rs 117 billion).
