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Re rising: How to play IT stocks now?
Published on Thu, May 17, 2007 at 01:16, Updated on Thu, May 17, 2007 at 01:22 in Business section
Tags: Stocks Markets, Rising Rupee , Mumbai
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Mumbai: The rupee breached its nine-year trading high recently and is currently trading at around 40.95.
The appreciating Indian unit is giving exporters, who receive payments in dollars, sleepless nights. The fortunes of many Indian tech companies are connected to the variances of the rupee-dollar movement.
To add to this, two US Senators from the Republican and Democratic parties have sent letters to nine Indian IT companies including TCS, Infosys, Wipro, Patni and Tech Mahindra, among others on Tuesday.
They have asked these companies to explain whether they use the H1B visa to fill worker shortage for a temporary period or completely outsource American jobs. This comes just before the US Senate is expected to debate the Immigration Reform Bill.
Indian IT body Nasscom does not see this as an immigration-related issue, but as an issue related to international trade. It said work permits and intra-company transfers should not be intermingled with immigration. Constraining H-1B supply when demand is high, will give rise to problems for both the US and Indian IT firms.
In light of these developments how should one play the tech sector? CNBC-TV18 asked some analysts on how they would play the IT sector.
Anand Tandon of Gryffon Investment Advisors feels the appreciating Indian unit has impacted IT companies quite badly. “The business is reasonably clear. The issue is how much can the rupee hurt and right now it looks like it has hurt quite badly. Usually you find IT stocks rallying from May-June onwards."
"It’s also the time when you would actually start to see next year’s results beginning to flow through into stock prices and the subsequent sell off that usually happens after the earnings announcement. I wouldn’t be surprise if you see the same kind of scenario playing out this year, especially with the latest forecast on the rupee saying that it will probably go back up rather than becoming stronger from these levels,” he added.
Raamdeo Agrawal, Managing Director of Motilal Oswal Securities, said the rupee will bounce back to around Rs 42-43.
“Investors seemed to be concerned about the rupee’s volatile movement. I think the rupee, which is currently moving around Rs 40.82, will bounce back to a more reasonable Rs 42-43. US investors don't think the Indian unit is going to stabilize at 40 odd levels, so in their mind it is more of a temporary phenomena related to liquidity rather than a permanent rupee appreciation,” he added
Source: Moneycontrol.com
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