IT stocks weigh on Indian stock markets

Wed, 15 Jun 09:30 am

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Asian stock markets have opened the day on a mixed note. Stock markets in China (down 0.5%), Hong Kong (down 0.5%) and Taiwan (down 1%) are leading the losses. However, the markets in Indonesia (up 0.8%) and Malaysia (up 0.2%) are trading in the green. The Indian stock markets have opened the day in the red. Stocks in the IT and banking space are leading the losses. However, metal stocks are trading firm.

The BSE-Sensex is trading lower by around 52 points (0.3%), while the NSE-Nifty is down by about 16 points (0.3%). The midcap and smallcap stocks are trading marginally in the positive with both the BSE Midcap and BSE Small cap indices up by 0.1%. The rupee is trading at 44.72 to the US dollar.

IT stocks have opened the day on a weak note with Infosys, Tata Consultancy Services (TCS) and Wipro trading in the red. TCS, Asia's largest computer-services provider by value, hired 70,000 employees in the previous financial year. It plans to add another 60,000 employees in the current financial year. The main reason for such massive hiring has been robust demand for outsourcing IT services. Compared to about 41,000 employees 6 years back, the company had 198,614 employees as on 31st March, 2011. According to a report by NASSCOM (National Association of Software & Services Companies) dated 15th February, 2011, the IT industry employs about 2.5 m people. However, the boom in the industry has also translated into a huge problem for the sector in the form of attrition. The financial year ended March 2011 saw the IT majors such as TCS, Infosys and Wipro dealing with the highest ever annual attrition levels.

Pharma stocks have opened the day on a mixed note with Piramal Healthcare, Ranbaxy Labs and Sun Pharma trading in the green. However, Dr Reddy's Laboratories (DRL) and Biocon are facing selling pressure. DRL announced that one of its chemical facilities in Mexico has received a warning letter from the United States Food and Drug Authority (USFDA). This Mexican facility of DRL was inspected by USFDA at the end of 2010. The inspection led to the issuance of 'form FDA 483' which is issued with regards to non-compliance in manufacturing practices. It includes the detailed observations by USFDA with respect to non-compliance. The USFDA cited four major discrepancies in the manufacturing facility. However, DRL has stated that the company has responded to all the observations made by USFDA and will implement the changes immediately.