The Hindu Business Line : Foreign funds inflow props up HCL Infosys

THE HCL Infosystems stock today swam upstream, thanks of spirited buying by some brokerages of foreign funds. According to dealers, HSBC is understood to have bought the stock substantially giving a fillip to its price.

HSBC Mutual Fund already holds significant amount of the stock in its portfolios. The Rs 923-crore HSBC Equity Fund, bigger of the asset management's local two equity schemes, as on February 29 had allocated 5.43 per cent of its net asset to HCL Infosys.

Incidentally, HCL Infosys attracted one of the highest portfolio allocations along with SBI, IOC and Grasim. However, when contacted, Mr Sanjeev Duggal, CIO of HSBC MF, declined to comment on the stock.

However, the global HSBC fund, HSBC GIF Indian Equity, did not have HCL Infosys among its top 10 equities (HCL Tech was among the Top 10) till December 31, 2003. The total foreign holding in the stock as on December 31, 2003 was around 10 per cent.

Domestic institutions also held around 10 per cent stake. There were differences of opinion among analysts and brokers regarding its valuation. According to Mr Rajesh Agarwal of CD Equisearch, today's move in the counter, though was triggered by the reported FII buying, indicated that the stock is fundamentally poised on a sound footing.

However, he felt, according to the current price-earning multiple, the stock seems to be a little overvalued. Mr A. Chowdhury of Taib Securities and Mr Ajay Jaiswal of Lohia Securities felt the present P/E was still attractive. CLSA, which advises HSBC MF, has recently strongly recommended the stock.

Mr Agarwal said the earnings growth prospects emanated from its own operations and also from its wholly-owned subsidiary, which markets Nokia cell phone sets. "With PC prices coming down, HCL is better placed now to take on the grey market. Further, 10 per cent import duty cut for handsets, has improved volumes for its subsidiaries. The company's 2-year warranty and 1 year insurance offers have made its sets price out grey market".

Mr Gaurav Dua of Anagram Stockbroking pointed out that the recent additional tax sops has consolidated its position as the leader in the domestic PC market. In the backdrop of projected growth rate of 50 to 60 per cent in the next five years in the international PC sales, HCL was expected to continue to do well, he added.

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