2007 Forecasts

IT stocks will do well

I am quite happy with the results of Infosys today. The market was expecting it to out do its earnings guidance. It didn’t happen and so the stock fell during early trade. But one needs to understand that the quarter was a difficult one for the IT sector as a whole in the light of depreciating dollar and there were lesser working days. The company has certainly lived up to the earnings estimates if not out done them. When this seeped in, the stock gained strength later. There has been a decent growth in top line and bottom line. The company bettered its margins on a sequential basis. Product revenues accounted for a higher proportion of the total income and this segment enjoys better margins. On the negative side, the attrition rate has risen. But this is something that the sector will have to live with. Not much can be done about it the way not much can be done about the rising rupee. Companies in the sector that handle this problem better will command better valuations. Companies like Infosys handle it better and so they command their valuations. If I am to advice someone to invest in the sector, I would recommend large caps. Though Infosys and Satyam are my favourites, TCS and Wipro wouldn’t be bad choices. Mid caps in the sector are having comparatively cheaper valuations but they come at the cost of higher perceived risk.

I am bullish about the sector’s prospects and see no major concern for the coming one year.

- Harit Shah, IT and Telecom sector Analyst, Angel Broking

Bullish trend yet to be confirmed

The markets recovered impressively today but I would still be cautious. Today’s rise was primarily on short covering and only partly on fresh new long positions. For a confirmation of the bullish uptrend having resumed, there need to be more new long positions being taken and the Nifty should cross 3972. The volumes were good today.

Before taking a stance, I would prefer to see how tomorrow’s session pans out. The markets are volatile and the result season is on. We might see “sell on news” trades with companies coming out with good results and these might have a negative pressure on the markets. The results to watch out for are Reliance Industries, ONGC, TCS and Wipro. They would have a say in the market’s further direction.

- Vineet Birla, Technical Analyst, Pranav Securities