Tech majors slipped deeper into the red on Friday, largely on lack of support from institutions.
All the four top software stocks - Wipro (down 2.11% to Rs 1,370.15), Infosys Technologies (down 2.15% to Rs 4,010), Satyam Computer (down 3.45% to Rs 205.75) and HCL Technologies (down 2.19% to Rs 158.70) - declined sharply on sustained selling pressure.
In five sessions, the BSE IT Index shed 106.24 points, or 7%, to the current 1,397.76 from 1,504 on 28 February 2003.
Dealers said the lack of support from institutions, mainly Life Insurance Corporation of India, has caused the huge slide in IT stocks. Earlier, LIC used to support Infosys, Satyam and Wipro, which cushioned the selling pressure. But, with LIC preferring to remain on the sidelines, the IT pivotals have plunged on offloading, especially by operators.
The weakness in IT stocks as well as in the overall market was mainly due to geo-political tensions. The US seems hell-bent on waging a war with Iraq despite dissent from other major nations. Despite the market being in an oversold position, players refrain from taking fresh positions on fears of a further slide. If the US-Iraq war breaks out, the IT sector would be the biggest loser, as the inflow of orders from the US may slow down, hitting revenues adversely. The sector receives over 65-75% of its export revenues from the US. Reports that a legislature in the state of Washington may soon consider a Bill that will make outsourcing from India difficult, has further raised concerns on the earnings of IT companies.
Meanwhile, the market awaits a crucial UN Security Council vote on Iraq next week and the report by chief UN weapons inspector Hans Blix on Iraq's cooperation with investigations today. War jitters had also pulled down US stocks on Thursday. The Dow Jones industrial average (down 101.61 points to 7,673.99) sank 1.3%, while the Nasdaq composite index (down 11.51 points to 1,302.89) fell by 1%.
In addition, a proposal by the Securities and Exchange Board of India to debar foreign institutional investors from participating in trading through the participatory note (P-note) route, as a part of the code of conduct for them, has raised fears that the activity of FIIs may decline. Players are also worried that the Unit Trust of India may indulge in a selling spree to tackle redemption pressures on some of its schemes. Tech stocks, which are considered to be favourites of FIIs as well as domestic institutions, may be hit severely in case of a sell-off.
SSI (down 4.97% to Rs 76.50), Mphasis BFL (down 4.82% to Rs 646), Trigyn Technologies (down 4.82% to Rs 14.80), VisualSoft Technologies (down 4.77% to Rs 162.60), Hughes Software (down 3.90% to Rs 167.60), Hexaware Technologies (down 3.81% to Rs 118.65) and NIIT (down 3.62% to Rs 122.45) were the other major losers among IT stocks.
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