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Once bitten, but not twice shy

Raja Simhan T.E.

CHENNAI, May 1

ALMOST all Indian information technology stocks went southwards last year following a downturn in the sector. Some professional investors including mutual funds and UTI reduced their stakes, probably as a mid-term correction, in IT stocks due to poor returns.

Interestingly, the public has picked up these stocks substantially in the last 12 months, especially in the tier-II software companies.

Figures collated by Business Line from the top 15 Indian software companies show that except in the top three — Infosys, Wipro and Satyam — and two tier-II firms, Moser Baer and Aptech Ltd, the public shareholding has increased in the rest of the stocks in the last one year, particularly in the last two quarters.

Further, in some IT firms including the city-based Pentamedia Graphics and SSI Ltd, the promoters have also reduced their stake in the last 12 months.

Says Mr M. Ravvichandran of Anush Shares, a city-based analyst tracking IT stocks, "Some professional investors and funds are apparently moving towards old economy stocks, and interest in IT stocks has definitely reduced".

"This is not to say that they (the public) are in a buying spree of IT stocks," he says. For, it is not known whether the common man is buying technology stocks by dipping into his savings bank account or by selling some old economy stocks. Probably retail investors still see value in IT stocks. "But, remember more often, retail investors are at the losing end," he adds.

In the case of the industry leader, Infosys, public shareholding came down to 12.51 per cent (82.78 lakh shares) by the quarter ended March 31, 2002, compared to 13.97 per cent (92.39 lakh shares) during the same period last year. The promoters' holding decreased to 28.72 per cent (29.15 per cent) by March 31, 2002 end, while the institutional investors' stake increased to 46.01 per cent (43.33 per cent).

Similarly, in Satyam Computer Ltd, the promoters brought down their stake to 22.26 per cent (25.6 per cent), while there is no significant change in the institutional investors' holdings in the said period. In DSQ, the public shareholding increased to 64.69 per cent (3.05 crore shares) by the quarter ended March 31, 2002, as against 28.94 per cent (1.36 crore shares) the same period last year.

On the other hand, the institutional investors' shareholding came down by half to 5.27 per cent (24.92 lakh shares) from 11.53 per cent (54.48 lakh shares). The Indian promoters stake in the firm stood reduced to 1.68 per cent (7.95 lakh shares), compared to 2.4 per cent (11.31 lakh shares) last year. Similarly, in the case of Pentasoft, institutional investors' stake has reduced by half to 8.69 per cent (17.72 per cent).

The promoters too brought down their stake by half to 23.88 per cent (49.5 per cent) in the said period.

According to Mr Ravvichandran, following the bursting of the IT bubble a year ago, retail investors have lost heavy money significantly.

"Retail investors generally believe that in averaging the cost (bought a stock say at Rs 400 and buying more at around Rs 200 would bring the average to Rs 300).This generally does not work. A section of retail investors wants to make money in the same sector or stock in which it had lost money earlier. This is also a bad principle. I think investors who are bullish on IT now are likely to lose money, as in the past," he says.

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