IT market cap falls Rs 28,000 cr

MUMBAI, JAN 7: Yesterday's darlings have become today's untouchables. Information technology stocks which defied stock market valuation ru...

MUMBAI, JAN 7: Yesterday’s darlings have become today’s untouchables. Information technology stocks which defied stock market valuation rules and economic fundamentals have taken a heavy beating with investors losing Rs 28,000 crore in the last three days. As IT stocks led by none other than Infosys – which has over 17% weightage in benchmark Sensex – hit lower circuit breaker (trading was suspended after 8% fall) for the third successive day on Friday, investors wealth (market capitalisation or total market value of all listed shares) in IT shares has fallen from Rs 1,95,463 crore on January 4 to Rs 1,66,621 crore on Friday.

As per the figures of India Index Services and Products, a joint venture between Crisil and NSE, the market cap of Infosys, the highest priced scrip in the Indian market, bore the brunt of bear operators by losing Rs 12,414 crore to Rs 43,454 crore in the last three days. Wipro, the company which tops the market cap list, fell by only Rs 5,602 crore and managed to withstand theonslaught of punters to some extent. Other IT favourites like Satyam, Pentafour, NIIT and Mastek were also hammered mercilessly by punters.

The IT sector was the prime market driver with its market cap touching almost 20 per cent of the total market cap of around Rs 10,00,000 crore. “While the market cap is a notional figure, the drop clearly indicates how overseas markets can influence our bourses,” said a BSE official.

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The major reason for the sustained fall in IT shares was the crash in technology shares on Nasdaq of the US. After the hammering on Tuesday and Wednesday, technology-rich Nasdaq Composite index sank 150.41 points or 3.88 per cent to 3,727.13 on Thursday. “IT shares in India closely follow the trend on Nasdaq. If Nasdaq stocks fall, Indian IT shares will also fall,” said stock-broker D Pawan. Market leader Infosys fell eight per cent for the third day in running, after gaining 34 per cent in the previous five sessions. Infosys was down Rs 1,145 to Rs 13,167.85 after hitting a high ofRs 16,875.25 on Tuesday. Other leading software shares which fell the maximum eight per cent on Friday included: Silverline Industries which fell Rs 66.20 from Thursday to Rs 761.80, NIIT down Rs 241.80 at Rs 2,780.75, Sonata Software down Rs 156.05 at Rs 1794.95, and Pentafour Software down Rs 106.30 at Rs 1,222.70.

Yet another reason cited for the fall in IT stocks was the hike in margins to 50 per cent. “The fall has much to do with the crash on Nasdaq. It has nothing to do with any fundamental changes,” Pawan said. IT stocks had hit all-time highs on Tuesday when the Sensex hit the top level of 5,533.98.

Brokers say that this is the firt time IT stocks are facing such a massive sell-off. A section of the market feels that the hammering in IT will not continue for a long time.

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