Financial Daily from THE HINDU group of publications
Friday, Jan 11, 2002
Info-Tech - Stock Markets
CMC, Digital weather the storm -- IT stocks, big losers in 2001
MUMBAI, Jan. 10
BUCKLING under global recessionary pressures, technology scrips were the worst affected in 2001, mainly due to a slowdown in the US economy.
The chain of events that contributed to a virtual free fall in the prices of IT scrips started with the Ketan Parekh and Tehelka episodes in March, followed by profit warnings from the US companies in April and the 9/11 event, ending with an official announcement of recession by the US in October.
An analysis of 20 technology scrips listed on the Bombay Stock Exchange reveals that most of them experienced a fall in prices ranging between 25 per cent and 86 per cent during the year. The companies that seem to have bucked the trend are CMC and Digital Globalsoft.
CMC's scrip benefited from Tata Consultancy Services (TCS) picking up a stake in the company during the last quarter of 2001. The scrip had been active towards the last quarter rising on the back of steady flow of orders. The scrip, which closed at Rs 250.30 on Jan 1, 2001, ended the year at Rs. 364.05 on Dec 31, 2001, registering a 45.4 per cent increase.
Digital Globalsoft has emerged as a relatively stable stock starting the year at Rs 469.45 on Jan 1, 2001, gaining by seven per cent before closing the year at Rs 500.30 on December 31, 2001. According to analysts, the company's scrip would have performed better had it not been for the HP-Compaq merger announcement.
``Compaq, which holds a majority stake in the company, was to be acquired by HP; hence everything depended on what the acquirer dictated. Digital's performance on the bourses, therefore, was affected mainly on account of the uncertainty surrounding the fate of new projects. However, the deal did not go through and the scrip recovered, stabilising by year-end,'' said an IT analyst.
While Infosys, Satyam Computers, Wipro and HCL Technologies, managed to contain their fall between 25 and 48 per cent, NIIT scrip fell by 86 per cent on account of a severe downturn in the software education business.
Moving on to 2002-03, analysts said, ``the stocks to watch out for are Satyam Computers and HCL Technologies. Based on their current valuation, it can be said that these scrips would do well this year. Besides, Infosys, which should register a 25-per cent growth in profits next year, would do well''.
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