IT index, stock futures trading in discount
The Satyam saga and World Bank ban on some companies has severely damaged the investor sentiment for the sector.
By Mandar Nimkar, ET Bureau |
MUMBAI: The Satyam saga and World Bank ban on some companies has severely damaged the investor sentiment for the sector. IT companies are constantly facing hurdles and there seems to be no respite for software stocks, at least in the near term.
That is what the trading pattern of software stocks in the derivatives market indicates, following the result of Infosys Technologies' and the Satyam saga.
Tuesday at 1:05 pm, CNX-IT spot was at 2145, down 1.20 per cent while CNX-IT futures was at a discount of 15 points to spot.
Despite prices of select frontline software stocks correcting since the Satyam scam, the stock futures price of most is still at a discount to their underlying cash market price. This indicates that market players are not comfortable about the growth and earnings outlook of these stocks.
Infosys January futures was trading at a discount of Rs 2. Futures price of TCS was at a discount of Rs 3 to spot. Wipro January futures was at a tiny discount of Rs 0.50 to spot and HCL Technologies near month price was at discount of Rs 2.50.
"The quarter gone by has proved to be extremely difficult for Indian IT companies. More companies are in trouble, budgets are becoming tighter, pricing pressure is worsening and vendor consolidation is also leading to increased uncertainty. Cross-currency movements have also emerged as a headwind for the sector. Against this backdrop, we expect further downgrades in guidance by IT companies," said Mukund Shejole, IT analyst at Global One Advisory.
That is what the trading pattern of software stocks in the derivatives market indicates, following the result of Infosys Technologies' and the Satyam saga.
Tuesday at 1:05 pm, CNX-IT spot was at 2145, down 1.20 per cent while CNX-IT futures was at a discount of 15 points to spot.
Despite prices of select frontline software stocks correcting since the Satyam scam, the stock futures price of most is still at a discount to their underlying cash market price. This indicates that market players are not comfortable about the growth and earnings outlook of these stocks.
Infosys January futures was trading at a discount of Rs 2. Futures price of TCS was at a discount of Rs 3 to spot. Wipro January futures was at a tiny discount of Rs 0.50 to spot and HCL Technologies near month price was at discount of Rs 2.50.
"The quarter gone by has proved to be extremely difficult for Indian IT companies. More companies are in trouble, budgets are becoming tighter, pricing pressure is worsening and vendor consolidation is also leading to increased uncertainty. Cross-currency movements have also emerged as a headwind for the sector. Against this backdrop, we expect further downgrades in guidance by IT companies," said Mukund Shejole, IT analyst at Global One Advisory.
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