The Telegraph
Since 1st March, 1999
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Guessing game on infotech turn-off

Mumbai, April 16: As the technology charm wears off, the market is checking if investors are ditching infotech queens to court trusted maidens of the old-economy.

Operators agonising over good bargains in computer shares and the fuddy-duddy commodity stocks have not picked the new winners, but they are clear that Infosys' letdown last Thursday changed minds and the money that would go to technology stalwarts.

This afternoon offered a foretaste of things to come: Hindustan Lever, which beat the Street on sales but still reported a lower profit, surged a staggering 4.42 per cent. The company, with a 13 per cent weightage in the BSE sensex, notched up a volume of 3.5 million shares and helped the market snap its five-day losing streak.

This lent credence to views in a section of the market that technology stocks are out of focus — if not out of favour — in the immediate term. “Companies like Telco, Reliance Industries, Lever and Tisco look good at their current levels,” said a broker who expects old economy counters to bounce back into the limelight. Among those that could see their fortunes look up are drug companies, auto firms, car-spare makers and banks.

Most expect Wipro, set to announce its fourth quarter results on Thursday, to mirror Infosys in its vision of the tough times facing the industry. That means squeezed billing rates and anorexic margins. “Therefore, the infotech sector does not look attractive,” a broker said.

There are others who counter the argument that infotech stocks are losing appeal, saying their valuations now present good bargain-hunting opportunities. An indication of that came through today, when Infosys Technologies and Satyam Computers rallied 5.7 per cent and 3.4 per cent respectively. However, Wipro suffered losses as operators sold its shares in anticipation of tame numbers.

“It doesn’t seem logical that funds will flow from new to the old economy,” says Jignesh Shah, a strategist at ASKRJ Investment Services.

Arun Kejriwal of Kejriwal Investment & Research Services feels value addition is taking place. “Infotech shares are being bought back at lower levels.”

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