IT stocks drag indices lower?

Wed, 25 Sep 11:30 am

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After a good start, the Indian stock markets have fallen sharply below the dotted line in the morning session. All sectoral indices except the Capital Goods index are trading lower.

The BSE-Sensex is down 185 points and the NSE-Nifty is trading down 61 points. The BSE Mid Cap index is trading down 0.6% and the BSE Small Cap index is trading down 0.2% The Rupee is trading at 62.64 to the US Dollar.

Most IT stocks are trading lower today. HCL Tech and Tech Mahindra are among the top losers. According to a leading business daily Tech Mahindra has bagged a medium sized offshoring contract from an Australia based telecom company Optus. Optus, which is a subsidiary of Singapore Telecom, is Australia’s second largest telecom company. Under the contract, Tech Mahindra will provide systems integration (SI); infrastructure management services (IMS) and back-office outsourcing to Optus. This is expected to reduce costs and increase efficiency for the vendor. The revenue potential of this deal is up to US$ 20 m, though the exact contract size was not disclosed by the company.

Tech Mahindra is a leader in providing IT solutions for the telecom sector and has executed many deals of this nature in the past. The telecom vertical contributed to 48% of the revenues for Tech Mahindra in 1QFY14. In FY13, on a standalone basis, this vertical grew by 16.8% over FY12. Tech Mahindra is trading down 0.7%.

Power stocks are trading mixed today. GVK Power and Infra and National Hydroelectric Power Corp. (NHPC Ltd) are leading the gainers; while Reliance infra and CESC Ltd are leading the pack of losers. According to a leading business daily, Power Finance Corporation Ltd (PFC), which is the nodal agency for ultra mega power projects (UMPPs), will invite fresh bids for two UMPPs. One is Bhedabahal in Orissa and the second project is Cheyyur in Tamil Nadu. PFC will issue RFQs for these projects this week.

Earlier this month, PFC had scrapped initial bids received from 20 power companies for setting up the 4,000 MW UMPP in Orissa way back in 2011. The project has been delayed due to absence of environmental clearance as well as scrapping of old Standard Bidding Documents (SBDs).The new Standard Bidding Documents (SBDs) have been finalized now and PFC will go ahead with inviting fresh bids. For the Orissa UMPP, all major clearances such as land acquisition, water linkage and coal blocks are in place now. Civil aviation clearance has also been obtained from the Airports Authority of India. For the UMPP in Tamil Nadu; which will be based on imported coal, all major clearances are available.

Many power developers like National Thermal Power Corporation (NTPC), Tata Power, Adani Power and others had shown interest earlier in the Orissa UMPP. It is likely that they will place fresh bids this time as well.