Software shares rally, Sensex up 77 points

Among shares that had hit the eight per cent circuit breaker level were Infosys Technologies up Rs 408.75 at Rs 5,518.75, Software Solutions Rs 35.35 at Rs 477.35, NIIT Rs 171.25 up at Rs 2,312.50, Digital Equipment Rs 39 at Rs 526.70, Sonata Software Rs 26.05 at Rs 353.30, HCL Infosys Rs 31.95 atRs 431.95 and Leading Edge Systems Rs 21.15 at Rs 285.80. Pentafour Software ended at Rs 1,274.80 rising Rs 68.80 from the last close of Rs 1,206. Satyam computers rose by Rs 110 to Rs 1,488.75.

"Infosys Technologies is definitely the leader after the success of its ADR (American Depository Receipt)," said one trader. Infosys hit a high of $121 at the NASDAQ exchange on Friday before closing lower at $110-3/4. At the current price, the ADR is quoting at a 73 per cent premium to the underlying. Two ADRs are equivalent to one share. "The mood in the market is very bullish," said a dealer with Mukesh Babu Securities.

“It seems for the present at least that interest has shifted from cyclicals to software and pharma to an extent. If the rally has to sustain, it has to shift from sector to sector," he said. Dealers said the fact that software firms led corporate India in first quarter results so far also boosted the sector. Average net profits of 31 companies which released earnings numbers grew 15 per cent inthe three months to June 30 compared to the same period last year, mainly because of strong performances by software firms.

Further, another corporate study had indicated that 14 software companies have made a 70 per cent rise in net profit to Rs 104 crore for the first quarter of the current year (1999-2000). Sales of these companies also rose 52 per cent to Rs 849 crore. Infosys alone had recently reported a 156 per cent spurt in net profit to Rs 61 crore for the first quarter.

Marketmen said the end of the Kargil conflict coupled with the Finance Minister’s statements last week that the country’s revenues were buoyant to manage any contingencies on the expenditure front due to the conflict aided the positive sentiment. Brokers expect the rally to continue in the coming days.

Several pharma shares also looked up. Ranbaxy ended Rs 41 higher at Rs 815, Tisco at Rs 150, Reliance at Rs 185 and Telco at Rs 275. “The market undertone is still bullish. Foreign investors and local operators are still showinginterest. There is a feeling that Sensex would touch the 5,000 level,” said an operator.

Merrill sees higher corporate earnings

MUMBAI: Indian companies expect to improve their earnings with optimism of an economic recovery untarnished by the Kashmir conflict, a survey conducted by DSP Merrill Lynch said.

The investment bank said it expected a reversal of a two-year trend which saw earnings downgrades of Indian firms. "There was optimism with regard to the economy, with nearly 50 per cent of corporates expecting the economy to improve and only a small fraction anticipating that it would deteriorate," DSP Merrill Lynch said in a report.

"Overall, the survey confirms the view that things are looking up in the (Indian) economy," DSP Merrill Lynch said. The general view was of a gradual recovery, it said. "There is likely to be lesser pressure on margins with a likely increase in demand leading to volume growth and a better pricing environment," it said.

"We, therefore expect the trend inearnings downgrades over the past two years to be reversed," it added. DSP Merrill said the survey was conducted when India was fighting a bloody battle against heavily armed guerrillas which India said was backed by arch-rival Pakistan in the disputed Himalayan territory of Kashmir.