IT stocks to remain market favourite

NetScribes/Rajiv Banerjee

The Indian stock market's affair with infotech is far from over. Analysts tracking the sector predict that although these stocks will remain range-bound in the next 8-10 days, they will pick up once the quarterly results are announced in October.

On the other hand, media and FMCG stocks may not have much to look forward to. Analysts say that in the coming week, media stocks will see a correction as they are considered overpriced. For the FMCG counters, it's a mixed bag with some scrips expected to do well even as others falter.

"Technology stocks will continue to rule the roost and will be the prime drivers for the Sensex. The quarterly results will be in line with market expectations; some of the companies may even outperform the expectations," says Rahul Banka, an analyst at Kisan Rathilal Choksey, a local BSE brokerage firm.

"Of the frontline stocks, Infosys will hover in the region of Rs 6,500-7,500 in the next week. Wipro is expected to rule in the Rs 2,000-2,600 range, while Satyam Computers will hover around Rs 500 in the next 8-10 days," says Tejas Doshi, a senior analyst with Sushil Finance Consultants Ltd.

Senior fund managers at Prudential-ICICI AMC and Sun F&C AMC say that a clearer trend for the tech stocks would emerge only by Thursday. Although the markets have witnessed some buying interest in Satyam, Zee Telefilms and SSI through the Morgan Stanley Growth Fund, marketmen argue that the buying interest at these counters remains largely speculative.

Even as IT stocks chart their northward journey, fancied media stocks are in for a spell of correction. Analysts expect the Zee stock to remain weak, even falling below the Rs 400 level. The TV-18 scrip also does not merit the valuation it currently enjoys and could touch Rs 400, analysts say.

There could be more bad news for the Zee counter as the market does not see the company posting good results in the current quarter. "The scrip will show a downtrend as Zee braces the impact of Kaun Banega Crorepati (KBC). Star TV has been able to attract huge advertisements, which is proving detrimental to Zee," says Shubhabrata Majumdar of First Global, a Mumbai-based brokerage. The scrip is currently trading at Rs 422 on the BSE.

Zee's moves to counter KBC are not expected to yield results immediately. "The excitement caused by Sawaal Dus Crore Ka will translate into actual results for the company only in the third quarter. The company has nothing to look forward to in this quarter," says Avinash Gorakshakar of Emkay Shares and Stock Brokers Pvt Ltd.

On the FMCG front, Hindustan Lever Ltd (HLL) is expected to slide below the Rs 200 mark. "The scrip is expected to take a further beating as the market does not expect the company to post a good performance in the coming quarter," says an FMCG analyst with Motilal Oswal Securities, a BSE brokerage firm.

On Monday, the scrip ended the day on the BSE at Rs 214.30, down Rs 3.70 (1.70 per cent) from the previous close of Rs 218.00.

Colgate, currently trading at Rs 161, is also expected to dip below Rs 150-145. Analysts believe Colgate will not see a major growth in its main product categories, given the intense competition in these segments. "In toothpastes, a major revenue earner, Colgate is facing competion from HLL. So it does not have much scope for good growth here," says Piyush Goenka, an analyst with First Global. The toothbrush segment contributes to only a minor portion of the company's revenue and is not expected to grow drastically either.

Other FMCG scrips seen turning in good performances include Britannia Industries and Nestle. While Britannia will reap the results of its aggressive brand positioning, Nestle will rise on the back of a strong financial performance in the coming quarter.

"Companies will not be able to survive merely on fancied P/Es; it is their performance that counts. If these companies are able to post good profits, it will get reflected in the stock market," says Abhay Aima, country head, equities and private banking, HDFC Bank.

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