Second-rung IT stocks lead mid-cap charge

Mumbai, Jan 22 | Updated: Jan 23 2007, 05:30am hrs
The current mid-cap charge on the bourses is being fuelled by second-rung IT stocks that have the highest market capitalisation weighting in the related BSE index.

Market analysts are of the view that since the IT sector is set for good growth over the next two to three years, IT stocks are now investors most preferred scrips. Another reason is, frontline IT stocks remain at the higher end of the valuation. Jayant R Pai, vice-president, Parag Parikh Financial Advisory Services Ltd, said, The mid-cap technology stocks have assumed leadership due to the overall mid-cap rally witnessed by the market. There was a huge gap in the valuation commanded by frontline IT stocks and mid-cap stocks due to their poor earning visibility earlier. However, the current third-quarter results of mid-cap IT stocks have dispelled those fears to a large extent.

In the last one month, a majority of mid-cap information technology stocks have staged a remarkable rally. CMC Limited rose by Rs 493.30 or 76.85% from Rs 641.9 to Rs 1135.20, while 3i Infotech Limited gained Rs 109.05 or 58.93% from Rs 185.05 to Rs 294.10.

NIIT Technologies Limited gained 44.17%, Polaris Software Ltd was up by 30.90%, Geodesic Information Systems Limited gained 33.55% and Rolta India Limited, 27.56%.

According to a markets analyst with a domestic brokerage house, the mid-cap rally is not just confined to information technology stocks but has spread across sectors.

The mid-cap stocks have consistently come out with better results and are finding value with the investors.