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June 2, 1998


IT stocks buck the bear

Email this story to a friend. The 30-share Sensitive Index has been swinging like a yo-yo ever since India established its nuclear capability three weeks ago.

With a change in the Standard and Poor's outlook on long-term foreign and local currency issue credit rating from stable to negative and with Pakistan blasting five nuclear devices last week, the BSE Sensex plummeted by
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IT stocks buck the bear
210.70 points over the past six trading days.

The Sensex settled at the end of the week at 3686.4 points.

Information technology stocks were an exception to the bearish trends that engulfed the stock markets last week.

IT majors like Satyam Computers, NIIT, Aptech, DSQ Software and HCL Infosystems scaled newer peaks. Certain low profile IT stocks like CG-VAK Software Exports, Innovation Software, Aftek Business Machines and Orient Information Technology also appreciated.

HCL Infosystems lost steam with prices inching up by only Rs 14 at Rs 282.20, before touching a high of Rs 324.40 in the past six trading days.

The sharp rally in the HCL stock over the past two weeks petered out as the expectation of a merger of its three subsidiaries, Network, HCL Office Automation and International Data Management, was substituted by an open offer by these three companies.

The increased contribution of divisions such as professional services organisation, Enterprise 2000 Organisation and the company's improved performance in the first half of 1997-98 has led to a sharp re-rating of the stock at the bourses.

From levels of around Rs 34 in the beginning of March 1997, the stock has recorded a stupendous rise to a high of Rs 324.20 during the week. Much of this rally was triggered by the expectation of a merger with its subsidiary companies.

In the first half of the current year, sales rose by only 7 per cent. Even with the operating profit dipping by around 30 per cent, due to a 70 per cent drop in interest costs, profit after tax improved to Rs 46.8 million from Rs 9.3 million in the first half of 1996-97.

The PSO division of HCL Infosystems caters to the high level IT consulting requirements of domestic corporates. It also undertakes turnkey software development for both domestic and overseas corporate houses.

It operates through software development centres in NOIDA, Madras and Calcutta. This apart, HCL Infosystems specialises in system integration for industries such as telecommunications, manufacturing, finance and banking.

Another area identified by the company for growth is functional consulting and implementation services for enterprise resource planning projects.

The E2K division of HCL Infosystems is in charge of implementation of ERP projects and the company has tied up with SAP AG of Germany for providing ERP solutions for which a centre of excellence has been set up in New Delhi.

Till 1996-97, this division had procured orders worth over Rs 2 million. Recently it picked up an order from Mahindra and Mahindra worth Rs 150 million for implementation of ERP solutions in its offices throughout India.

- Compiled from the Indian media

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