Tech stocks, dependent on exports for their fortunes, were well supported by institutions and operators despite war manifesting in West Asia.
The rational for this backing was that the war would not last for long and would not disrupt the global economy significantly. In fact, it is reckoned that all possible negative outcomes of war have already been factored in by the market, so techs have a downside support as well.
The three software scrips in the Sensex emerged strong on Thursday - Satyam Computer (up 4.32% to Rs 202.70), HCL Technologies (up 2.08% to Rs 156.95) and Infosys Technologies (up 2.23% to Rs 4,283.50).
Non Sensex stocks like Digital GlobalSoft (up 1.53% to Rs 633), Wipro (up 0.82% to Rs 1,347), Polaris (up 5.74% to Rs 127.20), Mastek (up 2.83% to Rs 535.15) and Hughes Software (up 1.88% to Rs 178.55) were among the gainers on BSE.
As per market talk, apart from operators, the Government of Singapore is undertaking buying activity on the Satyam and Polaris counters. Infosys Technologies, on the other hand, has the backing of Prudential ICICI and ABN Amro Broking.
The low valuations of tech stocks is prompting the current buying, it is believed. These stocks had been hammered over the last few sessions. But analysts warn that earnings of software companies may be hit hard in case the war prolongs as it could stymie order inflows from the US, hitting revenues of these companies adversely. The sector receives over 65-75% of its export revenues from the US. Already, there are reports that the spending by major US companies was sluggish in February 2003 with a rise of just 4.3%, below the December 2002 rate of 5%. This is significantly below the 6-7% that IT managers were expecting.
The weak US economy could also place a damper on tech spend by US corporates. There have been recent reports that a legislature in the state of Washington may soon consider a bill that could make outsourcing from India difficult.
On worries over war, the Computer Software sector, comprising 113 large, medium and small companies, lost 6.85%, or Rs 6,259.79 crore in market capitalisation over the last month.
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