MUMBAI, July 15: Buoyed by a series of tax concessions given to the infotech sector, punters are likely to go in for software shares in a big way. The government decision to give more sops to the software industry is likely to lead to higher bottom lines for many companies.According to a Nasscom estimate, software exports during the current year are slated to touch at least $2.7 billion against $1.7 billion in the previous year.Further, exemption of all computer software from import duty and removal of withholding tax is expected to reduce the price of software in the country. "This will add to the revenue from the domestic sector of software companies and also boost software exports," said an industry expert. According to Nasscom, these sops will help the Indian software industry aggregate revenues of over Rs 16,000 crore during 1998-99, including Rs 5,400 crore from the domestic market.Since these sops will come into effect on Thursday (July 16), marketmen expect an immediate impact on prices ofsoftware scrips. In fact, the introduction of volatility margins has failed to contain the rise at these counters. The prices, which are already on the rise on the back of excellent first quarter performance, will get a further fillip with these tax concessions.With export income from transmission of data to be treated as software exports (and therefore exempt from tax), some of the middle-rung software companies are expected to take advantage of the tax break. "This activity will pick up with earnings being made tax exempt," said a Delhi-based software consultant.This area offers tremendous growth opportunity and as per a Nasscom estimate, will generate one million jobs and more than $10 billion of cumulative exports in the next five years.Software companies, of late, have been in the forefront of a market rally. The trend is likely to continue with the software sector poised to grow at more than 60 per cent during the next two years. "Currently, a number of software stocks are available atattractive valuations and are well below their pre-budget level. Add to the fantastic results these tax sops and these scrips are likely to rally past their pre-budget tops," said a Delhi-based broker.For instance, Digital Equipment currently trades at Rs 134 against Rs 208 in April this year. Similarly, Pentafour Software is hovering around Rs 720 against its May level of Rs 1,076. Saytam Computer is quoting at Rs 500 against its June 1 price of close to Rs 600. It may be recalled that software scrips were one of the worst hit in the post-budget slump.
