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The budget has allocated Rs 1,680 crore to the Department of Information Technology in 2008-09 as against Rs 1,500 crore in 2007-08 and has announced three new schemes namely:
- Two schemes for establishing 100,000 broadband internet-enabled Common Service Centres in rural areas and State Wide Area Networks (SWAN) with Central assistance. This is already under implementation. Rs 7,500 crore is allocated for common service centre and Rs 750 crore for SWAN.
- New scheme with budgetary allocation of Rs 275 bn launched for State Data Centres.
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Customised software has been brought under the service tax net and will attract 12% service tax. |
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Excise duty has been increased on packaged software from 8% to 12% to bring it at par with customised software. |
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IT/ITES sector will benefit largely because of increase spending on education, which will result in large talent pool of professionals. This spending on education will also help in reducing the supply side constraints that is currently faced by the leading companies in hiring quality professionals. |
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The service tax on customised software is a negative for technology companies but it will be passed on to the clients. |
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While the Tier-I IT companies will not be severely impacted as they can easily move to SEZ, it is the mid tier IT companies which will feel the heat. |
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Companies like NIIT Technologies and MindTree Consulting will be adversely impacted from April 2009 onwards when the tax benefits end. These companies will find it difficult to migrate to SEZ, as it would entail huge cash outflow.
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Companies like NIIT, Educomp Solutions and Everonn Systems, which are functioning in the e-learning area will benefit due to the increased thrust on education to raise the talent pool in the country.
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Tulip IT services will benefit due to implementation of SWAN projects.
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NASSCOM Wish List |
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Continue the STP scheme and tax incentive under section 10A/10B beyond 2009, for the next ten years
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Broaden the eligibility criteria for Large Tax Payer Unit (LTU) scheme
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Relevant provisions need to be incorporated in the domestic law to provide a mechanism for allowing full credit for foreign taxes paid
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Advance Pricing Agreements (APA) to provide upfront tax certainty
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Refund of service tax paid on services utilised for export of computer software and BPO services
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| Budget 2005-06 |
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Budget 2006-07 |
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Budget 2007-08 |
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Zero customs duty on items bound under the Information Technology Agreement.
In order to provide a level playing field to the domestic industry, customs duty on specified capital goods and all inputs required for the manufacture of ITA bound items has been removed.
Additional countervailing duty (CVD) at 4% has been imposed with immediate effect from 1st March 2005 only on items bound under the Information Technology Agreement, and on specified inputs/raw materials for manufacture of electronics/IT goods. Credit for the CVD will be available against payment of excise duty.
IT software and documents of title conveying the right to use IT software will not be subject to this levy.
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Excise duty of 12% imposed on computers. Excise duty on DVD drives reduced to nil.
Excise duty of 8% imposed on over-the-counter (OTC) packaged software, excluding software downloaded from the Internet and customised software.
Duty on clearances to Domestic Tariff Area from Export Oriented Units or units in Electronic Hardware Technology Parks, Software Technology Parks etc. is being changed from 50% of the aggregate of customs duties to 25% of basic customs duty plus full CV duty.
For the purpose of fringe benefits tax (FBT), valuing the benefit in the form of 'tour and travel' at 5% instead of 20%.
The service tax has been increased from 10% to 12%.
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Minimum Alternative Tax (MAT) to be applicable on IT companies.
Fringe Benefit Tax (FBT) to be levied on Employee Stock Option Plans.
Dividend Distribution Tax to be increased from 12.5% to 15%.
Increased allocation to Rs 7.2 bn as against Rs 3.9 bn in the previous year for ambitious e-governance project.
A new scheme of manpower development for the software exports industry launched with allocation of Rs 330 m.
Benefits of investment in Venture Capital Fund extended to Information Technology sector, by giving a pass-through status to the same.
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| [Read more on Budget 2005-06] |
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[Read more on Budget 2006-07] |
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[Read more on Budget 2007-08] |
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| Key Positives |
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| Huge outsourcing potential: Offshoring has been well and truly accepted as a major strategic decision that can enhance the competitive advantages of global corporations. The value proposition of offshore development has been proved beyond doubt and as an industry, offshoring is still very much in the growth phase. Even among the global 1000 companies, the offshoring penetration levels are not that high. This is a significant point, since these are companies with IT budgets in the range of US$ 500 m to over US$ 1 bn. The global market share of Indian companies is also miniscule. Thus, these pointers are clear indications that there is plenty of room for the Indian software industry to grow, given the immense and untapped potential. Offshore outsourcing to India offers considerable economical benefits for those who are prepared to exploit the advantages of outsourcing. |
| Moving up the value chain: Indian software companies are consistently broadening their portfolio of offerings and moving fast up the value chain. Given that traditional services, such as application development and maintenance (ADM), are getting commoditised, it is imperative for these companies to move higher up the value chain into areas like consulting, package implementation and systems integration. Not only will this help Indian companies get higher billing rates from their clients, it will also give them an opportunity to work closely with the top managements of client companies. |
| Other positives: Among other positive factors for the Indian software industry, the major ones are large availability of talented manpower, cost advantage and geographical advantages (time-zone advantages). The companies involved in IT outsourcing in India provide high quality work, meeting international standards and complying with the ISO & SEI-CMM standards. Three out of every four SEI-CMM 5 companies worldwide are located in India. |
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| Key Negatives |
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| High reliance on the US markets: The US market's share in India's software and services exports is fairly high, at around 60% to 65%. Even though it has come down a little during the last year but such a large degree of dependence on a single geographical location spells high risk for the Indian software sector. Over that, the backlash in the US against outsourcing of jobs to low-cost countries like India has raised some medium-term concerns for Indian software companies. |
| Decreasing competitive advantages: Increasing competition from global technology majors has not only threatened the Indian IT industry's cost leadership, Indian software companies have also been made to face intense competition for talent. All these pressures mean flat billing rates and higher employee costs going forward. This is likely to affect margins and, consequently, the profitability of Indian companies. The BPO service providers have achieved maturity in practices like relationship management and knowledge management. They need to diversify to employee engagement, process improvement, recruitment, migration planning and workforce management. If this is not done, the IT companies could find maintaining the current client satisfaction level as challenging. |
| High rates of attrition: High attrition, especially in the middle and senior positions, continue to damage the performance of Indian software companies to a certain extent. The average industry rate is around 18% which when compared to other industries is on the higher side. The companies, in a bid to overcome high attrition rates, are recruiting science graduates and training them, which means higher training cost and loss of billable hours. Apart from competition for talent from MNC technology majors, internal factors like job dissatisfaction and higher aspirations (in case of BPO companies) have led to such high attrition rates in the Indian software sector. |
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| Sector Performance |
|
| COMPANY |
PRICE (Rs) |
|
| 3I INFOTECH |
40.3
(0.3%) |
|
| 63 MOONS TECH |
429.1
(0.5%) |
|
| AAA TECH |
75.0
(4.2%) |
|
| AASHEE INFOTECH |
1.4
(4.4%) |
|
| ACCELERATEBS INDIA |
367.0
(0.0%) |
|
| ACCELYA SOLUTIONS |
1,727.8
(-0.9%) |
|
| ADJIA TECH |
39.4
(5.0%) |
|
| ADROIT INFOTECH |
21.2
(5.0%) |
|
| ALL E TECHNOLOGIES |
252.6
(1.6%) |
|
| ALLIED DIGITAL |
137.3
(-0.0%) |
|
| ALLSEC TECHNOLOGIES |
790.0
(-0.6%) |
|
| ALPHALOGIC TECHSYS |
139.5
(5.0%) |
|
| APTECH |
255.0
(0.6%) |
|
| ARCHANA SOFTWARE |
98.5
(0.0%) |
|
| ATISHAY |
67.0
(0.0%) |
|
| AURIONPRO SOLN |
2,576.0
(-4.2%) |
|
| AURUM PROPTECH |
141.5
(-1.5%) |
|
| AVANCE TECHNOLOGIES |
0.9
(-1.1%) |
|
| AVANTEL |
111.6
(-12.6%) |
|
| AXISCADES ENG. |
629.8
(1.4%) |
|
| BARON INFOTECH |
0.8
(0.0%) |
|
| BARTRONICS INDIA |
24.7
(2.0%) |
|
| BHARATIYA GLOBAL |
3.5
(-4.9%) |
|
| BIRLASOFT |
660.5
(0.3%) |
|
| BITS INDIA LIMITED |
3.2
(-1.9%) |
|
| BLS INFOTECH |
3.3
(-1.8%) |
|
| BLUECLOUD SOL |
60.0
(-2.5%) |
|
| BNR UDYOG |
69.7
(4.8%) |
|
| BODHTREE CONSULTING |
6.0
(4.9%) |
|
| CALIFORNIA SOFTWARE |
16.8
(3.5%) |
|
| CAMBRIDGE TECH |
93.0
(-0.7%) |
|
| CANARYS AUTOMATIONS LTD. |
53.3
(-7.1%) |
|
| CE INFO SYSTEMS |
1,981.0
(-2.3%) |
|
| CIGNITI TECHNOLOGIES |
1,233.6
(-1.3%) |
|
| COFORGE |
5,217.0
(0.4%) |
|
| COMPUCOM SOFTWARE |
35.6
(1.4%) |
|
| CONTINENTAL CHEM |
78.0
(4.1%) |
|
| COSYN |
42.0
(-2.2%) |
|
| CRANES SOFTWARE |
4.5
(0.5%) |
|
| CYBERTECH SYST. |
166.9
(-1.0%) |
|
| CYIENT |
1,916.0
(1.3%) |
|
| D-LINK (INDIA) |
326.1
(0.4%) |
|
| DANLAW TECHNOLOGIES |
1,823.7
(5.0%) |
|
| DATAMATICS GLOBAL |
612.8
(0.2%) |
|
| DATASOFT APPLICATION |
26.0
(1.7%) |
|
| DC INFOTECH AND COMMUNICATION |
54.3
(7.4%) |
|
| DELAPLEX LTD. |
248.0
(-3.7%) |
|
| DIAMOND INFOSYSTEMS LTD. |
0.7
(0.0%) |
|
| DRC SYSTEMS |
19.4
(-0.4%) |
|
| DUCON INFRATECHNOLOGIES |
7.7
(-1.9%) |
|
| DYNACONS SYSTEMS & SOLUTIONS |
1,339.0
(0.8%) |
|
| E.COM INFOTECH |
88.8
(-5.0%) |
|
| E2E NETWORKS |
1,195.0
(3.8%) |
|
| ECLERX SERVICES |
2,451.3
(2.1%) |
|
| ECS BIZTECH |
8.2
(1.4%) |
|
| EKENNIS SOFTWARE |
135.0
(3.7%) |
|
| EKI ENERGY SERVICES |
349.5
(-1.8%) |
|
| EMUDHRA |
765.2
(-0.9%) |
|
| ENSER COMMUNICATIONS LTD. |
70.5
(0.6%) |
|
| EQUIPPP SOCIAL |
35.0
(4.4%) |
|
| EUPHORIA INFOTECH (INDIA) LTD. |
69.0
(-2.2%) |
|
| EXPLEO SOLUTIONS |
1,308.0
(-0.1%) |
|
| FCS SOFTWARE |
4.2
(-1.4%) |
|
| FIRSTOBJECT TECH. |
6.9
(-0.1%) |
|
| FIRSTSOURCE SOLUTIONS |
215.7
(7.1%) |
|
| FOCUS BUSINESS |
66.0
(5.0%) |
|
| FOURTH GEN. |
5.5
(0.0%) |
|
| G-TEC JAINX EDUCATION LTD. |
85.5
(-4.5%) |
|
| GENESYS INTL. |
644.2
(0.9%) |
|
| GLOBALSPACE TECH. |
21.2
(-1.6%) |
|
| GLOBESECURE TECHNOLOGIES LTD. |
49.6
(3.4%) |
|
| GSS INFOTECH |
138.0
(-1.4%) |
|
| HAPPIEST MINDS TECHNOLOGIES |
818.8
(0.0%) |
|
| HCL TECHNOLOGIES |
1,503.7
(1.6%) |
|
| HIT KIT GLOBAL |
1.1
(0.0%) |
|
| HRH NEXT SERVICES LTD. |
38.0
(0.0%) |
|
| HYPERSOFT TECH. |
8.2
(2.4%) |
|
| ICICI PRU IT ETF |
35.6
(0.4%) |
|
| INDIAN INFOTECH |
1.5
(-1.3%) |
|
| INFIBEAM AVENUES |
35.2
(-1.0%) |
|
| INFO EDGE |
5,904.4
(0.5%) |
|
| INFORMED TECHNOLOGIES |
109.0
(-8.4%) |
|
| INFOSYS |
1,438.4
(0.5%) |
|
| INFRONOICS SYST. |
59.0
(-1.7%) |
|
| INNOV.SOFTW. |
5.6
(-1.8%) |
|
| INNOVANA THINKLABS |
503.5
(-0.9%) |
|
| INTRASOFT TECHNOLOGIES |
135.4
(-4.4%) |
|
| ISHWAR TEXTILES |
56.0
(9.9%) |
|
| IZMO |
364.8
(10.0%) |
|
| JETKING INFOTRAIN |
55.5
(-1.5%) |
|
| JOINTECA EDU. |
13.4
(0.0%) |
|
| JONJUA OVERSEAS |
11.6
(0.0%) |
|
| JUPITER INFOMEDIA |
43.2
(5.0%) |
|
| KANDARP DIGI SMART BPO LTD. |
28.7
(6.1%) |
|
| KERNEX MICROSYS |
547.1
(0.0%) |
|
| KODY TECHNOLAB LTD. |
870.4
(4.9%) |
|
| KPIT TECHNOLOGIES |
1,374.1
(0.3%) |
|
| KSOLVES INDIA |
1,109.7
(1.0%) |
|
| L&T TECHNOLOGY SERVICES |
5,181.0
(-1.0%) |
|
| LATENT VIEW ANALYTICS |
500.0
(-0.9%) |
|
| LCC INFOTECH |
1.9
(-1.5%) |
|
| LTIMINDTREE |
4,636.5
(-2.0%) |
|
| MAHAVEER INFOWAY |
8.6
(-4.1%) |
|
| MASTEK |
2,742.0
(-1.1%) |
|
| MEGASOFT |
76.4
(0.0%) |
|
| MEGRI SOFT |
145.5
(20.0%) |
|
| MICROPRO SOFTWARE SOLUTIONS LTD. |
52.1
(0.2%) |
|
| MINDPOOL TECHNOLOGIES |
85.0
(0.0%) |
|
| MINDTREE |
3,433.4
(0.1%) |
|
| MOSCHIP SEMI |
156.7
(-6.8%) |
|
| MPHASIS |
2,237.1
(-0.2%) |
|
| MRO TEK. |
83.0
(1.1%) |
|
| MULTI-PURPOSE |
9.3
(-4.9%) |
|
| NAAPBOOKS |
261.5
(-4.9%) |
|
| NAZARA TECHNOLOGIES |
638.5
(-1.8%) |
|
| NETRIPPLES SOFTWARE |
5.5
(0.0%) |
|
| NETTLINX. |
109.9
(-0.5%) |
|
| NETWEB TECHNOLOGIES |
1,725.5
(-0.1%) |
|
| NETWORK PEOPLE SERVICES TECHNOLOGIES LTD. |
1,470.0
(5.0%) |
|
| NEWGEN SOFTWARE |
804.7
(7.1%) |
|
| NHC FOODS |
40.2
(-0.7%) |
|
| NIIT |
107.6
(0.1%) |
|
| NIKS TECHNOLOGY |
526.3
(5.0%) |
|
| NINTEC SYSTEMS |
436.7
(-1.5%) |
|
| NOUVEAU GLOBAL |
0.5
(0.0%) |
|
| NUCLEUS SOFTWARE |
1,373.7
(0.1%) |
|
| OBJECTONE INFO |
19.5
(1.9%) |
|
| OCTAWARE TECHNOLOGIES |
49.8
(-1.8%) |
|
| OLATECH SOLUTIONS LTD. |
154.4
(5.0%) |
|
| OMNI AX`S SO |
3.3
(0.0%) |
|
| ONMOBILE GLOBAL |
80.6
(-0.9%) |
|
| ONWARD TECHNOLOGIES |
463.0
(-2.1%) |
|
| ORACLE FINANCIAL |
7,170.0
(-2.6%) |
|
| PALRED TECHNOLOGIES |
132.0
(0.7%) |
|
| PANACHE DIGILIFE |
85.0
(0.9%) |
|
| PARLE SOFTWARE |
9.0
(-0.3%) |
|
| PATNI COMPUTERS |
515.8
(-0.1%) |
|
| PE ANALYTICS |
280.0
(-1.8%) |
|
| PERSISTENT SYSTEMS |
3,430.3
(-1.0%) |
|
| PFL INFOTECH |
4.7
(2.4%) |
|
| PLADA INFOTECH SERVICES LTD. |
28.4
(-3.9%) |
|
| PLATINUMONE BUSINESS SERVICES LTD. |
182.0
(2.8%) |
|
| PROTEAN EGOV TECH |
1,236.8
(-0.1%) |
|
| QUADPRO ITES LTD. |
5.4
(0.0%) |
|
| QUANTUM BUILD |
3.1
(-9.0%) |
|
| QUESS CORP |
626.2
(-1.1%) |
|
| QUEST SOFTECH |
44.0
(4.4%) |
|
| QUICK HEAL TECHNOLOGIES |
501.1
(-2.4%) |
|
| QUICKTOUCH TECHNOLOGIES LTD. |
182.3
(-1.0%) |
|
| QUINTEGRA SOLUTIONS |
2.0
(-4.8%) |
|
| R.S.SOFTWARE |
281.0
(-2.0%) |
|
| RAMCO SYSTEMS |
365.1
(-3.9%) |
|
| RATEGAIN TRAVEL TECH |
731.0
(3.6%) |
|
| RCC CEMENTS |
12.6
(4.9%) |
|
| RESPONSE INFOR. |
72.1
(-0.5%) |
|
| ROLTA INDIA |
7.1
(1.4%) |
|
| ROX HI-TECH LTD. |
123.6
(-3.1%) |
|
| SAGARSOFT (INDIA) |
215.0
(0.6%) |
|
| SAHANA SYSTEM |
852.2
(4.3%) |
|
| SAKSOFT |
282.7
(-0.6%) |
|
| SANCODE TECHNOLOGIES |
85.4
(3.5%) |
|
| SANMIT INFRA |
17.5
(2.0%) |
|
| SASKEN TECHNOLOGIES |
1,619.0
(4.6%) |
|
| SAVEN TECHNO |
60.9
(3.4%) |
|
| SCANPOINT GEOM. |
6.2
(1.0%) |
|
| SECMARK CONSULTANCY |
111.5
(0.5%) |
|
| SECUREKLOUD TECHNOLOGIES |
40.0
(1.1%) |
|
| SENTIL INFOTEK |
12.1
(-5.0%) |
|
| SEQUEL E-ROUTERS |
165.6
(-2.0%) |
|
| SIGMA SOLVE |
415.0
(2.0%) |
|
| SOFTSOL INDIA |
251.0
(0.6%) |
|
| SOFTTECH ENGINEERS |
344.6
(5.0%) |
|
| SONATA SOFTWARE |
673.0
(0.3%) |
|
| SOUTHERN INFOSYS |
17.4
(-0.6%) |
|
| SPACE INCUBATRICS TECHNOLOGIES |
1.9
(-1.6%) |
|
| SPACENET ENTERPRISES |
27.6
(-2.8%) |
|
| STARCOM INFO. |
55.0
(-0.9%) |
|
| SUBEX |
32.0
(0.3%) |
|
| SUVIDHAA INFOSERVE |
6.0
(0.3%) |
|
| SYLPH TECH. |
2.9
(-2.1%) |
|
| SYSTANGO TECHNOLOGIES |
293.8
(0.1%) |
|
| TAKE SOLUTIONS |
23.5
(1.9%) |
|
| TANLA PLATFORMS |
966.4
(-1.9%) |
|
| TATA ELXSI |
7,093.8
(0.8%) |
|
| TCS |
3,851.9
(0.5%) |
|
| TECH MAHINDRA |
1,190.1
(0.3%) |
|
| TECHNVISION VENTURES |
1,944.4
(-2.0%) |
|
| TELESYS SOFT |
9.5
(5.8%) |
|
| TERA SOFTWARE |
49.1
(2.0%) |
|
| TRACXN TECHNOLOGIES |
95.5
(-0.0%) |
|
| TRANWAY TECHNOLOGIES |
7.0
(-5.0%) |
|
| TRIDENT TECHLABS LTD. |
265.7
(5.0%) |
|
| TRIGYN TECHNOLOGIES |
120.1
(0.3%) |
|
| TRUST FINTECH LTD. |
233.0
(5.0%) |
|
| TYCHE INDUSTRIES |
217.0
(-2.4%) |
|
| USG TECH SOLUTIONS |
9.4
(4.9%) |
|
| USHA MARTIN EDUCATION |
5.6
(-0.9%) |
|
| VAKRANGEE |
25.6
(1.1%) |
|
| VCU DATA |
7.6
(0.8%) |
|
| VEDAVAAG SYSTEMS |
53.0
(-0.1%) |
|
| VEEFIN SOLUTIONS |
328.2
(5.0%) |
|
| VERTEXPLUS TECHNOLOGIES LTD. |
148.8
(5.0%) |
|
| VINSYS IT SERVICES |
348.2
(-0.8%) |
|
| VIRGO GLOBAL |
10.4
(-3.6%) |
|
| VIRINCHI CONSULTANTS |
38.8
(-3.3%) |
|
| VIVO COLLABORATION SOLUTIONS LTD. |
78.7
(0.0%) |
|
| WE WIN |
88.9
(3.9%) |
|
| WEP SOLUTIONS |
39.5
(1.7%) |
|
| WHERRELZ IT SOLUTIONS |
125.0
(2.5%) |
|
| WIPRO |
461.0
(0.2%) |
|
| XTGLOBAL INFOTECH |
40.9
(-1.9%) |
|
| ZEE LEARN |
6.3
(-1.9%) |
|
| ZEN TECHNOLOGIES |
1,022.0
(1.8%) |
|
| ZENOTECH LABS |
69.0
(0.3%) |
|
| ZENSAR TECHNOLOGIES |
575.2
(-1.0%) |
|
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