SSI scrip slides despite acquisition

NetScribes/Rajiv Banerjee

Though software major SSI has acquired a US company, its scrip has suffered a downside at the bourses. The scrip fell 2.88 per cent to Rs 2622.

However, analysts say that the fall is due to the unwinding of long positions built up by small-time operators in anticipation of the acquisition news. SSI announced its acquisition of AlbionOrion Company LLC for $ 63.65 million.

"The past 15-20 days have seen short-term operators building up long positions at the SSI counter. The moment the news was announced operators started selling. Hence, the scrip fell," says Avinash Gorakshakar of Emkay Shares and Stock Brokers Pvt Ltd, a BSE brokerage firm.

However, while some analysts argue that the scrip could slide further to the Rs 2,100 levels over the next four weeks, SSI is still considered a strong long-term buy.

At the BSE, the SSI scrip closed at Rs 2,622.90 on September 18, 2.88 per cent lower from the previous close of Rs 2,700.75. The scrip reached a high of Rs 2,751.00 on the news of acquisition and touched a low Rs 2545.00 during the day. A total of 1.4 million shares were traded.

Gorakshakar says that operators had built up long positions on all major infotech scrips and were now selling. The impending oil hike announcement has also dampened the sentiment at the stock market, feel analysts.

Analysts also feel that the SSI fall is in tandem with the overall fall in the Sensex. At the BSE, the Sensex closed at 4366.4 points, a drop of 4.29 per cent from the previous close of 4562.4.

At the National Stock Exchange, the scrip closed at Rs 2,610, a drop of Rs 108.60 (or 3.99 per cent. A total of 0.98 million shares were traded.

SSI is still a good long-term buy because of its strong fundamentals and the recent acquisition, feel analysts.

"In the last quarter, SSI recorded 214 per cent growth. The market expects the next quarter to be equally good because of organic and inorganic growth," said Gorakshakar.

"A technical correction is likely to pull the Sensex down to the 4,000 levels. As a result, SSI may also fall to around Rs 2,100. But an upside to the Rs 3,500-4,000 levels is not ruled out," says an analyst from First Global, a Mumbai-based research outfit.

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