It was a range bound week with a difference. The optimistic guidance from technology stalwart, Infosys reaffirmed the market's faith in the sector and lifted the BSE Sensex above the 3500 mark. Despite losses in early sessions, the Sensex gained 9 points and Nifty was up 4 points. Market also responded well to the healthy performances of some of the second rung tech companies, which performed as expected. With the sector attracting substantial buying interest the 2-month old rally in PSU energy stocks came to a halt. As a result the combined daily trading volumes at BSE and NSE were a shade above Rs 4000 crore from the last week's average of Rs 3428 crore.
BSE IT Index went up by 4.8 percent with Infosys delivering better than expected results. It has beaten its growth estimate of 30 percent for 2001-2002 by seven percent and is projected to grow at a conservative yet more than expected 17-20 percent in the current fiscal. With an upbeat sentiment, investors grabbed Satyam and Wipro expecting them to deliver results in line with those of Infosys. The year-end results of the second-rung tech companies Mphasis BFL, Mastek, Hinduja TMT triggered buying interest in these stocks. While the trio recorded a huge jump in the bottomline growth due to higher productivity, efficient manpower utilization and new revenue sources, Aztec Software was a disappointment. To hold a single view about the sector may then be a serious error. Amidst a seemingly superficial recovery in the US tech market, these performance triggers and the future forecast will separate the men from boys.
The week saw yet another earning downgrade by the US tech bellwether, IBM. However with a clean chit given by Securities Exchange Commission over its accounting practices, the stock bounced back. Both indices closed the week in a narrow range as Enronphobic investors seemed to adopt cautious optimism. In recent weeks world-renowned brands like Xerox and Computer Associates have come under the SEC clout for accounting practices.
Back home, the Indian markets gave a cold shoulder to the scheduled downward revision of their weightage in the new free float Morgan Stanley Emerging Market Free Index. The market musings were that the same was discounted in earlier cuts and its unlikely to hinder the foreign inflows as the FII investment limit for most of the Indian companies has been on a considerable rise. But the numbers tell a contrasting tale – Foreign funds have invested a mere Rs 198 crore since the start of new fiscal as against Rs 632 crore in the corresponding period of the last fiscal.
While the technology story will take heed from results of other index heavyweights – Satyam and Wipro, the action in the old economy segment will be centered on the results of Hindustan Lever. We once again expect stock specific news to direct the market sentiment, in the absence of any support from the macro fundamentals. Infact, the latter may be a deterrent as Yashwant Sinha's bold budget moves are finding few takers.