Tech stocks subdued as markets await new lead

By Oommen A. Ninan

MUMBAI, MARCH 25. Stock markets in the country are awaiting a direction. Even though current values are considered attractive, sentiment continues to be dull.

``The high level of uncertainty will probably keep the markets listless for some more time,'' said Mr. Parag Shah, CEO of Milan Mahendra Securities. According to him, the economic numbers for the current year and for February continue to show a sharp deceleration in growth rates especially in infrastructure areas.

The Bombay Stock Exchange (BSE) 30-Share Sensitive Index (Sensex) lost 110.46 points at 3635.28 from the previous week's close of 3745.74. On the National Stock Exchange the S&P CNX Nifty Index closed on Friday at 1163.30 against 1191.15 on the previous Friday. The fall in stock prices continued during the week except on Wednesday when FIIs led buying helped Sensex gain 118 points. The rally was short lived as the profit warning by Visual Soft sent stocks plummeting especially in the technology sector. There was a sharp fall in the value of outstanding positions as operators as well as investors have squared up positions before the financial year close. Raids on several brokers also led to nervousness in markets with many players squaring up their positions.

The first indication of a slowdown or otherwise in the performance of software companies will come on April 14, when Infosys will announce its last quarter results. ``In the prevailing confusion, Infosys will be doing a great favour to the investor community if it could advance the announcement of its results by two weeks,'' said Mr. V. R. Srinivasan, managing director of R.K. Chari Stock Broking.

The technology stocks lost sharply on the last two days of the week after the profit warning from Visual Soft on Thursday. Rumours of profit warning from Infosys and SSI on Friday led to these stocks remaining under pressure for most of the day. Buying by a few FIIs led to some stability in Infosys towards the end of the session. ``The fear about the fall in growth rates now seems to be catching up with the small investors also with several of them now selling out their delivery stocks also. Our worry is that the de-rating that is going in the sector has been quite severe and the interest in the sector may not be rekindled for some time,'' said Mr. Shah.

Stock markets are in a paralysed situation. The culprit is not the retail investor but the institutions which are supposedly long term value investors. At every level these (institutions) are selling in abundance giving credibility to all sorts of rumours.

The underlying position is still unclear. A number of brokers seem to have gone underground with defaults raising day by day. While the Government should act decisively and firmly and in a time bound manner against the culprits it should announce measures to reactivate the market and infuse confidence in the minds of investors. ``One who has closely studied the events, knows it is the lack of direction and leadership in crisis management, that has brought the market to the current state as opposed to the performance of companies,'' said Mr. Srinivasan.

The banks are behaving as if there is no tomorrow with a view to minimising the erosion of margins but on the contrary their panic reaction has aggravated the southward movement of stock prices.

Perhaps the Government, it is suggested in some quarters, could seriously consider direct intervention in the market similar to the measures initiated by the Hong Kong Government when their market in a similar situation in 1997 at the time of the Southeast Asian crisis.

The responsibility of reviving the market solely rests with the Government, despite its pre-occupation with containing the damage, caused by the Tehelka expose. Neither the Securities and Exchange Board of India (SEBI) nor the Bombay Stock Exchange could do anything without active cooperation and support of the Government.

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Section  : Business
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