Software scrips bounce back

MUMBAI, June 24: Software scrips are back with a bang. After a fortnight-long bear hug, bulls have finally regained the upper-hand in these ...

MUMBAI, June 24: Software scrips are back with a bang. After a fortnight-long bear hug, bulls have finally regained the upper-hand in these counters on the stock markets. Frenzied buying by foreign and domestic funds yesterday saw almost all infotech scrips shoot up on the bourses. In fact, a number of these scrips hit the upper-end of the circuit filter soon after trading began on Wednesday and continued to attract a buyer freeze for the rest of the day. Most of the counters also witnessed huge volumes of over a lakh shares.

HCL Infosystems, which had been hitting the lower end of the circuit filter for many days, bounced back with a buyer freeze on BSE. The scrip opened the day at Rs 98 and closed at its intra-day high of Rs 106.25. Similarly, Pentafour Software, which was hammered down to Rs 394, shot up to Rs 443.25. Satyam Computers, too, hit the the 10 per cent band on BSE to close at Rs 350 compared with Rs 318 on Tuesday.

The attractive valuations could be one of the reasons for the sudden revivalof interest in the technology scrips. These stocks had risen to dizzy heights thanks to the blind bull run and most of them were trading at ridiculous P/Es. The consequent bear-hammering seems to have corrected this anomaly and most of infotech stocks are now available at attractive valuations though they are still higher than their pre-bull run prices.

More important is the rupee depreciation which is viewed with cheers in the software industry. With the rupee breaching the 43-mark, software exporters can look forward to a healthy bottomline. As exports account for almost 30-40 per cent of the total turnover, a further depreciation in the rupee will only be an added bonanza.

The recent guidelines on employee stock options is also good news for the industry. Companies going in for ADRs/GDRs can now offer their employees dollar-linked shares. For an industry where the employee-turnover ratio is very high, this can be a useful tool to offer lucrative packages to employees and prevent poaching. Although itis difficult to say whether the rise in the infotech scrips is the beginning of yet another rally, for investors this could be a good opportunity to log into the sector for gains in the medium-to-long term.