Software: Scaling up! - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Software: Scaling up!

Dec 24, 2003

The year 2003 has been a turnaround year for companies in the Indian software sector - 'turnaround' in the sense that most of the Indian software companies have witnessed some respite from the pressure that they had been facing on account of slowdown in the global technology spending for the past two years. Outsourcing became increasingly mainstream and some companies (like Wipro, Infosys, Satyam and HCL Tech) were able to garner large-size deals. Also, as the situation improved relative to the past couple of years, Indian software companies (especially the majors) saw reduced pressure on billing rates and strong volume growth. The stock market fortunes of Indian software companies continued with their traditional volatility patterns. Early this year (April 2003), much to the discontent of investors, software stocks took a plunge post Infosys' declaration of 'less-than-expected' earnings growth for fiscal 2004, only to bounce back in line with the overall rally in the markets. Especially in the month of November, many software stocks touched new highs - some based on fundamentals, and some on speculation.

The gainers' pack…
(Rs) 01-Jan-03 10-Dec-03 Change
HCL Infosys 93 389 318.3%
Hexaware 117 408 248.6%
Hughes Software 198 518 162.1%
i-flex 439 817 86.3%
MphasiS 358 650 81.4%

If one were to consider the table above, there appears a stark similarity between most of the companies in that list - all of these have been among the major beneficiaries of changing variables of the Indian software sector. Take for example, Hughes Software. This company had been under throes of extreme pressure post the slowdown in telecom spending due to high degree of pressure on global telecom companies. But as the environment towards telecom spending improved and the company diversified its revenue stream and entered new areas like BPO, investors reinvigorated their faith in this niche player. And the effect is as seen in the table above.

…and the losers'
(Rs) 01-Jan-03 10-Dec-03 Change
Silverline 23 7 -71.1%
Pentasoft 10 4 -60.1%
Mastek 538 292 -45.7%
DSQ 19 12 -38.1%
Trigyn 26 21 -18.9%

Well, apart from the gainers as mentioned in the first table, there have been some companies that have been shunned by the investor community post a slew of poor performances from them in the past. Ironically, most of these companies were also involved in the stock market scam of 2000. It is nice to see investors not repeating their mistakes! But then, these stocks were witness to intense speculation in the latter half of the year.

All said and done, stocks from the Indian software sector have borne the brunt of intense speculation in recent times. Even among those companies that have gained substantially in this rally, most are now trading at stretched valuations.

What to expect?

While the outsourcing opportunity would continue to be huge for Indian companies in the year to come, investors need to keep a close watch on the fundamentals. Scalability (both by anticipating opportunities as well as moving up the value chain) would be a big factor for Indian software companies in their growth prospects going forward. And investors would gain from investing in those companies that are able to meet their clients' requirements on this (scalability) front.

Equitymaster requests your view! Post a comment on "Software: Scaling up!". Click here!

  

More Views on News

TATA ELXSI Share Price Up by 6%; BSE IT Index Down 0.8% (Market Updates)

Nov 27, 2020 | Updated on Nov 27, 2020

TATA ELXSI share price is trading up by 6% and its current market price is Rs 1,610. The BSE IT is down by 0.8%. The top gainers in the BSE IT Index are TATA ELXSI (up 6.3%) and L&T INFOTECH (up 5.4%). The top losers are PERSISTENT SYSTEMS (down 0.6%) and MPHASIS (down 0.9%).

QUESS CORP. Share Price Up by 5%; BSE IT Index Down 0.8% (Market Updates)

Nov 27, 2020 | Updated on Nov 27, 2020

QUESS CORP. share price is trading up by 5% and its current market price is Rs 503. The BSE IT is down by 0.8%. The top gainers in the BSE IT Index is QUESS CORP. (up 5.4%). The top losers are MPHASIS (down 0.7%) and INFOSYS (down 0.7%).

TAKE SOLUTIONS Share Price Up by 6%; BSE IT Index Down 0.5% (Market Updates)

Nov 27, 2020 | Updated on Nov 27, 2020

TAKE SOLUTIONS share price is trading up by 6% and its current market price is Rs 42. The BSE IT is down by 0.5%. The top gainers in the BSE IT Index is TAKE SOLUTIONS (up 5.6%). The top losers are INFOSYS (down 0.4%) and MPHASIS (down 0.5%).

INFO EDGE at All Time High; BSE IT Index Up 0.3% (Market Updates)

Nov 27, 2020 | Updated on Nov 27, 2020

INFO EDGE share price has hit an all time high at Rs 4,206 (up 0.6%). The BSE IT Index is up by 0.3%. Among the top gainers in the BSE IT Index today are INFO EDGE (up 0.6%) and L&T INFOTECH (up 4.4%). The top losers include HEXAWARE TECHNOLOGIES and FIRSTSOURCE SOL. (down 0.1%).

More Views on News

Most Popular

Stocks that Could Shine More than Gold After Diwali (Profit Hunter)

Nov 17, 2020

If the markets become volatile over the next few months, do this.

Not Infosys or Wipro. India's Next Wealth Creators Could Be Drone Stocks (Profit Hunter)

Nov 25, 2020

India's drones directorate signals the next big defence tech multibaggers.

How the New Margins Will Impact You (Fast Profits Daily)

Nov 25, 2020

The new rules on margins will come into effect from 1st December. Are you ready?

How to Build the Best Trading System (Fast Profits Daily)

Nov 20, 2020

In this video, I'll show you how to make the best trading system.

An Eraser and Some Pencils (The Honest Truth)

Nov 17, 2020

Ajit Dayal on the road ahead for the world after covid.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE IT


Nov 27, 2020 (Close)

COMPARE COMPANY

MARKET STATS