IT stocks could be preferred investors' choice: analysts
20, Sep, 2008.

MUMBAI: IT stocks could be the preferred investors' choice due to rupee depreciation and hopes of improvement in global market sentiment after the intervention of the US Federal Reserve for rescuing insurance giant AIG, according to market analysts.

The persistent global financial turmoil is likely to ease following prompt efforts by the US government. And coupled with rupee’s weakness against the greenback, this can be seen as a positive trigger for IT stocks as the sector's revenue visibility is expected to improve, HDFC Securities, Head Retail Research, Deepak Jasani said.

“The US financial crisis may be coming to end temporarily and sales orders would be visible for the IT companies in the near future,” he said.

A weaker rupee would also help the sector earn more margins on their future orders, Jasani added.

Echoing similar sentiments, an analyst with a leading broking house said this is the right time to enter the market and IT sector could be one of the better options as yields are more or less based on company profile in the current scenario.

However, SBI Capital Securities’ Head of Research, Anil Advani, said, "Market is yet to come out of the adverse global financial crisis but the companies having less exposure can be a better option for the investors."

Most of the IT stocks, on Wednesday, surged during the day on fresh buying, despite a down trend in the market, after a sharp fall in rupee and reports of softening credit crisis. Early buying also emerged in the tech counters on hopes that a weaker rupee would help the sector regain some of the lost sheen.

IT sectoral index on BSE was one of the least affected indices that ended with a marginal negative gap. However, it moved up over 2 per cent in the afternoon and most of the IT stocks traded with a comfortable positive gap for most of the time during the session.

Wipro was the top gainer ending up 2.04 per cent at Rs 399.75. Infosys Technologies ended up 0.75 per cent at Rs 1576.00, after moving up 3.6 per cent at Rs 1,612.10. However, Satyam Computer Services closed 1.91 per cent down and TCS down by 2.77 per cent.

Continuous depreciation of rupee, to nearly 47.00 level on Tuesday, has raised hopes of improvement in IT stocks, which were hit badly in the last couple of years when the Indian unit kept on appreciating, according to market analysts.

The partially convertible Indian currency fell to 46.98 against the dollar--its weakest level since July 24, 2006, on increasing demand from banks earning arbitrage between domestic and offshore markets amidst fluctuating sentiments in the stock market.

Sustained high demand from oil companies and the banks indulged in non-deliverable forward contracts resulted in a sharp depreciation of rupee against the greenback this year due persisting global financial crisis but has raised hopes for companies much dependent on rupee movement, marketmen observed.