Infy, Wipro dip as market gives thumbs down

NetScribes/Ganesh Ramamoorthy

Bill Gates' much-publicised second visit to India has not brought any good news for the two heavweight infotech stocks, Infosys and Wipro. In fact, both the scrips were beaten down at the bourses on Friday. The reason: No announcement of any mega deal or contract booking from software giant Microsoft.

Ironically, as the announcement of Microsoft's alliance with Infosys spread in the markets, the Infosys scrip declined instead of moving up and dragged the Sensex down along with it. Infosys lost Rs 120 on Thursday and shed another Rs 58 on Friday.

"I was looking forward to some kind of outsourcing deal between Microsoft and Infosys, like the one Wipro has with Microsoft. But nothing came through," said an analyst with a Mumbai-based securities firm.

"The markets had very high expectations from this visit and was anxious to hear of one or two mega deals being struck with the Indian software majors, Infosys and Wipro. Apart from the Microsoft-Infosys alliance, nothing else has materialised. The market is very disappointed by this," said Sagar Tanna, fund manager at Asit C. Mehta Brokerage.

The disappointment was reflected vividly on the bourses as frontline software scrips, led by Wipro and Infosys, tumbled to their lows on Friday, a day after the Microsoft-Infosys alliance was announced. The fact that nothing extraordinary came out of the alliance proved a dampener for most technology stocks which had surged in anticipation.

The worst affected was Wipro as the scrip declined by over Rs 250 to a new low of Rs 2,9825.25 at the BSE on Friday. Infosys managed to escape the wrath with a small fall of about Rs 58.40 and closed at Rs 8,507.90 (previous close: Rs 8,566.30)

In February, Microsoft had announced a more definitive agreement with Wipro, wherein Wipro Technologies was to outsource software development and testing on the Windows 2000, Windows CE and Internet applications.

But this time, Wipro has bagged no deal, while Infosys has managed to ink a minor alliance. However, analysts don't expect this tie-up to have any immediate revenue implications for Infosys. Though the alliance will certainly add to Infosys' bottomline, it is not sure if the Indian software major will have to part with its expertise on Internet and e-commerce for an exclusive application for Microsoft.

Operators, who had built long outstanding positions in the hope of announcements of new deals between Infosys, Wipro and Microsoft, started unwinding their positions as they realised that both had failed to get anything substantial from the US giant.

As of September 14, 2000, the total outstandings at the BSE stood at Rs 31.52 billion, of which outstandings at the Infosys and Wipro counters accounted for Rs 4.71 billion and Rs 2.14 billion, respectively.

"Friday being the last day of current settlement at BSE, operators with long outstandings went on a selling spree on these two scrips to cover their positions. This resulted in a decline in the prices of these scrips," Tanna said. While Infosys had appreciated by more than 40 per cent, Wipro had gained about 32 per cent since the first week of August till the current crash.

However, analysts say that the fall in the scrip prices is only temporary. "Most software stocks were facing strong resistance at their recent highs. Friday's fall indicates that a short-term corrective move has started," said Tanna, adding, investors would be better advised to wait for this short-term downtrend to end before buying infotech stocks.

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