Satyam Computer Services stocks, which were traded with an implied volatility of 400% on Friday, is likely to have its spill over effect on the market from Monday. Satyam saga would definitely hamper the overall Indian market, experts feel.
Dharamchand Sethia, a stock market analyst told FE that Satyam scrip touched the ground at Rs 6 on Friday. Thereafter the price gradually went up to Rs 24, giving 400% return. ?An implied volatility of 400% is abnormal at any market condition and it will influence the prices of other stocks too,? Sethia added.
According to Vivek Bajaj, director of Kredent Capital Market Academy, the 400% volatility of Satyam stocks was its share prices falling sharply. ?Satyam stocks cannot be priced at anything below Rs 6 unless it is dead scrip. Hence at every call Satyam stocks are likely to get a higher price. However, the price recovery level is not likely to go beyond Rs 35-38,? Bajaj said.
The Satyam saga will have a far reaching impact on the market as the foreign market investors would start giving a lower value to the Indian capital market as an asset class.
?Due of Satyam episode coupled with the global slow down, many companies will show genuine results, which will further dip the sensex. The Indian capital market, as an asset class will be re-rated and it is likely that the profit earning ratio, which is 14 at present, will be re-rated to 12,? Bajaj said.
Foreign as well as domestic capital market investors would want that the standards of Indian corporate governance is revoked and companies go beyond mandatory disclosures to make voluntary disclosures, he added.
Sethia said Satyam has already affected the scrip price of L&T, which has a 3.95% holding. L&T has not given any signs of offloading Satyam stocks and so its prices went down by 10% on Friday.
However, if L&T chooses to take up the management control of Satyam Computers, both Satyam and L&T prices would start gaining as it would indicate the continuity of its business.
?The future of Satyam scrip will depend a lot on who holds the management control. In fact, for a Satyam client like GE, it will be horrendous to change its IT vendor and bring in place a new one. So Satyam as business will continue to remain viable but it has to change its face by bringing more clarity in the corporate governance and accounting system,? Bajaj said.
On the other hand, Sethia felt if Satyam lost clients, those clients will have to choose between TCS, Infosys and Wipro as foreign IT firms like Oracle may not be able to match Satyam?s infrastructure.