X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Software: Divergent trends - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 21, 2003

    Software: Divergent trends

    Indian software stocks have been battered in the Indian as well as the US markets. However, it is a different story for US IT stocks. Technology stocks in the US have risen strongly and steadily in the past few months, seemingly due to optimism expressed by investors that a pick-up in IT spending is on the horizon. While there has been an interest in technology stocks in the last two months, it is premature to say, based on investor sentiments, whether we are witnessing a revival of the global IT sector.

    For one, global IT majors do not seem too confident. Their reiteration that while demand has stabilized, absolute triggers of a full-fledged recovery are still not visible indicates the lack of confidence. Hence, we believe that US technology stocks may have moved too fast in anticipation of a positive outlook. Unless some hard evidence emerges, indicating resurgence in demand for technology products and services, it is likely to be tough for global technology stocks to maintain their upward momentum.

    Global IT majors gain…
    Nasdaq quotes (in US $) Mar-03 May-03 Change May-02 May-03 Change
    Intel 16 19 18.5% 30 19 -37.3%
    Microsoft 23 25 7.0% 26 25 -5.4%
    HP* 19 21 10.5% 19 21 10.5%
    IBM 77 86 12.6% 85 86 1.7%
    Dell 26 30 15.7% 27 30 12.4%
    *NYSE quotes

    Giants like Intel, Microsoft, HP, IBM and Dell have seen their stock prices rise in the US stock markets over the period since March 2003. While Intel and Microsoft have seen a downturn during the past year, the overall performance for these global giants has been rather promising on the bourses. A host of new initiatives, stable financial performance and optimism on better times ahead is leading the technology rally in the US. For example, Microsoft, recognizing the tough economic environment, is relying on its ongoing investment in R&D to enhance productivity and value of its IT investments. PC major Dell Computers expects growth to be driven mainly by a combination of concentration on growth in the core businesses and investment in long-term opportunities related to its core businesses. Though the outlook of these companies seems forward looking, it may be a while before real benefits are derived from their strategies.

    …while Indian ones languish
    Nasdaq quotes (in US $) Mar-03 May-03 Change May-02 May-03 Change
    Infosys 63 41 -34.9% 63 41 -34.4%
    Wipro 30 20 -34.0% 34 20 -41.8%
    Satyam 10 8 -19.5% 10 8 -19.5%

    However, the performance of Indian software majors has been relatively disappointing, both in the Indian stock markets and on the Nasdaq. Infosys Technologies, for example, has seen a significant fall on the Nasdaq, of around 35%, both for March-May ‘03 and May ‘02-May ‘03. Wipro and Satyam have also witnessed considerable decline in their ADR prices during this period. This downgrading of Infosys’ stock, for example, is mainly a result of pressure the company is facing on pricing front, and consequently its ‘less-than-expected’ projections for FY04. Indian investors, thus, seem to be less optimistic than their American counterparts and have been observing utmost caution while investing in software stocks.

    During the 1990s, technology sales worldwide grew by more than 10% per year, thus fueling healthy profit margins. But times have changed now and the growth seen in the 90’s may not be seen in this decade. IT spending from corporates has become more rationalised. Times have also changed to the extent that Indian companies are facing increasing competition on the home-turf from global IT majors. And the effects of this are apparently seen in the performance of Indian software stocks in the recent past. Thus, investors need to exercise caution on selecting their picks from the Indian software sector. For one, only those players with significant size and adequate systems in place will be able to survive and grow in the future. Investor confidence in turn is likely to favour such entities.

     

     

    Equitymaster requests your view! Post a comment on "Software: Divergent trends". Click here!

      
     

    More Views on News

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    Infosys: A Flat End to FY17 (Quarterly Results Update - Detailed)

    Apr 13, 2017

    Infosys ends FY17 with a 7% QoQ fall in net profit for the March quarter.

    Infosys: A Decent Quarter (Quarterly Results Update - Detailed)

    Jan 13, 2017

    Infosys has reported a 0.2% QoQ decrease in the topline and an increase of 4.6% QoQ in the bottomline for the quarter ended December 2016.

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    INFOSYS LTD SHARE PRICE


    Aug 17, 2017 (Close)

    TRACK INFOSYS LTD

    • Track your investment in INFOSYS LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    INFOSYS LTD 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE INFOSYS LTD WITH

    MARKET STATS