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Since 1st March, 1999
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Technology tanks, Infosys incinerated
Software stars come under a cloud

Mumbai, April 10: Technology titans capsized in the wave of investor fury that swamped trading floors after Infosys shocked and awed Dalal Street like none before.

Computer companies were bruised, living down the nightmare of their lives as investors left distraught by the Bangalore bellwether’s pessimistic profit forecast whip-lashed shares of firms that flaunt software badges.

A bottomline boost of 12 per cent is what Infosys expects in the first quarter of the current financial year (2003-04), but shareholders fed on a diet of heady growth numbers for years lost their taste for a dose of realism.

The company, which rarely dished out numbers less than 20 per cent when it made profit projections, shrunk a quarter smaller in market worth when it all ended. The share plunged 27 per cent; the market capitalisation was down Rs 7,250 crore at Rs 20,164 crore. The BSE tech index, a barometer of all technology stocks, was poorer by Rs 15,817 crore at Rs 63,316 crore.

“It was an unprecedented day. It was shock & awe, the Dalal Street kind,” said a stunned Ramesh Damani.

The merciless pounding saw institutions and retail investors selling ICE stocks with a vengeance that led many to have second thoughts on the fabled tech resilience.

“Why should I rate Infosys higher than commodity stocks', wondered Jignesh Shah, strategist at ASK RJ Investment Management Services. “Its earnings growth mirror that of commodity firms. Infotech majors talk about lower double-digit growth rates, similar to the better-performing commodity stocks. The market will not pay a premium on these shares,” he added.

Marketmen and analysts have been worried about the impact of the current economic environment and the war in Iraq on the company's performance this fiscal and were looking forward to the company’s guidance for the future.

There were expectations that Infosys would throw up an earnings-growth guidance in the range of 18-20 per cent for this fiscal. Analysts had felt that any guidance below this figure could be damaging for its stock price and could also influence the prices of other software scrips.

This morning’s whammy was the hardest ever that Infosys has taken on bourses. The stock crashed Rs 1,113.45 to end at Rs 3,044.60. The wild-fire spread to others in the same business. Mastek, for instance, lost 50 per cent of its value at Rs 284.70, Wipro shed Rs 224.80 at Rs 1,007.60, Digital gave up Rs 104.25 at Rs 491.95 and Satyam slid Rs 27.55 at Rs 150.70.

The haemorrhage left the Bombay Stock Exchange sensex tottering at 105.92 points, or 3.37 per cent, lower at 3035.33. It had plumbed a trough of 3021.74 earlier in the day.

Among the major sellers were foreign institutional investors, who realised that the growth stocks were a better bet. That explains why old-economy firms held out.

In the BSE’s specified group, 154 shares declined, while 41 advanced. The volume of business was higher at Rs 1,644.12 crore compared with the previous day’s Rs 1,036.32 crore.

Infosys was the chart-topper with a turnover of Rs 518.70 crore. It was followed by Mastek at Rs 188.37 crore. Drug majors came out unscathed. Cipla gained Rs 17.05 at Rs 743.65, Dr Reddy’s advanced by Rs 6.65 at Rs 931.55 and Ranbaxy by Rs 18.70 at Rs 683.90. SBI jumped Rs 6.80 to Rs 290.90, Hero Honda gained Rs 8.70 at Rs 193.00 and ITC shot up by Rs 14.20 at Rs 673.95.

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