Feb 27, 2009

IT stocks reboot as rupee tumbles

26 Feb 2009 | 14:46 IT stocks reboot as rupee tumbles

The BSE Sensex was down 0.08% to 8,895.26

Shares of top four software pivotals saw mixed trend. TCS (up 1.71%), and Infosys Technologies (up 1.39%), gained. However, Wipro (down 1.26%) and HCL Technologies (down 1.24%), fell.

Among other IT shares, Oracle Financial Solutions Services (up 3.37%), MphasiS (up 6.47%), Satyam Computer Services (up 1.33%), Patni Computers (up 0.85%), edged higher.

The Indian rupee tumbled against the dollar as higher oil prices spurred demand for dollars from importers, while mixed Asian shares offered little comfort. The partially convertible rupee fell to a 3-month low to 50.26 per dollar, weaker than Wednesday's close of 49.96/97. The rupee had hit a life-time low of 50.65 against the US dollar on 2 December 2008.

A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports.

The BSE IT index had underperformed the market over the past one month till 25 February 2009, rising 0.86% as compared to the Sensex's rise of 2.63%. It also underperformed the market in the past one quarter, falling 14.20% as compared to the Sensex's 2.38% rise.

The underperformance was due to concerns of cut back in technology spend by global firms amid a recession in the US economy and due to the global financial sector crisis. IT firms derive a lion's share of revenue from exports to US.