Software stocks see huge offloading

Our Markets Bureau

New Delhi, Sept 12: The Indian software stocks witnessed massive off-loading on Wednesday following the terrorist strike in the US.
Software companies, which have a huge exposure to the US markets, plunged by over 14 per cent in a day. The BSE Teck index, which is already in dumps due to the world-wide recession, slumped further losing 62.87 points or 7.73 per cent to touch 750.84 points.
This was despite the fact that the Securities and Exchange Board of India (Sebi) had put in place a 10 per cent circuit breaker in the top 53 stocks.

The downtrend was more pronounced in second rung IT stocks like Polaris Software, Silverline Technologies, Sonata Software, SSI, PSI Data, DSQ Software, Rolta India and Mastek where there was no circuit breaker. These stocks took severe beating and dipped by 10-14 per cent. According to a Delhi-based broker: “The US is the major market for Indian software companies and many of them get as much as 60 per cent of their revenues from there. Thus, these companies would be under pressure as the orders may dry up.”

A Delhi-based fund-manager said: :The software companies may not get new orders from US companies who will have to pay large compensation to employees who died or were injured during the terrorist attack. Besides, the decision-making process will be hit due to closure of offices and casualties of senior employees.”

Though there is much rationale behind the drop in prices, brokers felt that most of it was triggered by panic selling and the stocks might recover in the near future. Especially, the top-rung IT companies like Infosys and Wipro are expected to recover some of their losses in the coming days.

According to Indiabulls.com president (secondary markets) Gajendra Nagpal: “Over the months, markets have distinguished between serious and non-serious players in IT sector. In the past, serious players have shown some resilience and gained back their losses while the rest have not been able to do so. It will be these serious players who are expected to bounce back in the coming days.”