IT heavyweights find some favour

Thu, 20 Jan 01:30 pm

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Persistent selling led the Indian markets to drop deeper into the red during the previous hour of trade. Selling activity is being witnessed in stocks across sectors led by those from the oil & gas, FMCG, realty and banking spaces. IT stocks are however trading marginally higher as the IT heavyweights have managed to find favour today.

The BSE-Sensex is trading lower by about 170 points (down 0.9%), while the Nse-Nifty is trading lower by about 50 points (down 0.9%). Small and midcap stocks have also followed suit as the BSE Midcap and the BSE Small cap indices are trading lower by about 0.5% and 0.4% respectively.

Stocks of software companies are currently trading mixed with NIIT Technologies, HCL Technologies and MPhasis leading the pack of losers, while TCS, Tech Mahindra and Infosys are trading firm.

Mindtree announced its results for the quarter ended December 2010 yesterday. During the quarter the company reported a flat (up 0.1% QoQ) topline as compared to the preceding quarter i.e. 2QFY11. Growth remained flat during the quarter due to stable volumes on account of lower number of billing days as well as year-end budget pressures from clients. Mindtree's operating margins declined by 0.4% QoQ during the quarter to 11.7%. This decline in margins was on account of restructuring costs related to the NIW business. Operating profits declined by 3% YoY during the quarter. At the profit before tax level, the company reported an 8% QoQ increase mainly on the back of higher other income. However, on the back of a lower tax outgo, the company’s profits increased by 21% QoQ.

As for the performance during the nine month period ended December 2010, revenues were higher by 18% YoY, while profits declined by 57% YoY. During the quarter ended December 2010, the company added 30 new clients taking the total number of active clients to 269. However, one concern for the company is the high attrition rate which stood at 24.2% during the quarter.

Power stocks are currently trading mixed with NTPC and Torrent Power trading firm, while CESC Ltd and PTC are trading weak. State-owned, Power Grid Corp has bagged a Rs 16 bn project to develop the transmission system of Jharkhand. The company is expected to sign an agreement with Jharkhand State Electricity Board in the next few weeks. The project is expected to come up in the next 18 months. Power Grid would set up 1,000 kms of transmission lines and 10 sub-stations in the state. The project aims to reduce the state's transmission losses while facilitating power transmission.

The country's largest transmission utility has earmarked a capital expenditure of Rs 120 bn for the current fiscal and it expects to raise this to Rs 180 bn by the next fiscal. The transmission business contributes almost 90% of its revenue at present. The company expects its telecom and consultancy businesses to increase their share in the total revenue in the near future.