Satyam shares up as new Board meets

MUMBAI, INDIA: Monday morning brought in lots of hope and positive sentiments for Satyam, as the government's move to set up a new three member board comprising IT expert and former NASSCOM president Kiran Karnik, eminent banker Deepak Parikh and C Achuthan, former SEBI member, received an overwhelming response from the investors and the sensex.

Today, Satyam stocks were up over 50 per cent compared to its dismal condition on Friday, when the value touched as low as Rs 6.

According to Devarsh Vakil, manager, Anagram Research, the reason for it is that during last week there's was the key question among people and investors about Satyam's fate – whether it will survive or die?

“But with new three strong member board with good experience and governance skills, there are signs that Satyam can recover back from its worst. And such signs are helping investors to put faith back in Satyam's stock, which has resulted in 56 per cent rise in its value today,” said Vakil.

According to Rajiv Mehta, IT stock research analyst, India Infoline, this government move is more off a damage control act and so it has helped to wipe off negative sentiments about Satyam and resulted in boosting its stock.

“It's more related to people or investors' sentiments but not from business point. Being an analyst, I would like to know how the board will get new CXOs to keep the company running and manage such large staffs and its businesses,” Mehta argued.

While, Satyam was moving towards some sort of recovery, another IT major, Wipro Technologies and technology company Megasoft suffered losses in the stock market today.

Though Wipro said in a statement said that the World Bank's ban would not affect its revenues and future businesses, that confidence was not reflected in the stock market, as Wipro stocks were down by over 9 per cent.

The stocks which closed at Rs 250.65, opened at Rs 240.00 and later went up to Rs 248.00 before collapsing to Rs. 220.00. At the close of the day the share price regained to Rs 227.35, a loss of Rs 23.30, or around 9.30 per cent.

“Though, Wipro's stock lost to some extent for a day or in time ahead, the World Bank issue won't have any major impact on its business revenues. Because, the worth of stocks is determined by its revenues and earnings, not by any sentiments,” Mehta explained.

“The dip in Wipro's share is mainly due to the World Bank's report. In the IT index, Infosys has 66 per cent stock, TCS has 14 and Wipro has 8 per cent. However today all the three IT stocks lost about 3 to 10 per cent stock value on the index,” explained Vakil.

According to Vakil, the recent events in IT sector has overall tarnished the industry's image and will have negative impact on IT stocks too.

On Satyam's fiasco, Vakil opined, “Now, foreign companies are more apprehensive towards Indian IT firms and their major concerned are towards assurance and security about their data and its privacy.”

Earlier Indian companies were getting more business due to low cost services in outsourcing and data processing, but now it would be hard in getting new business and retaining old clients, Vakil pointed.

“According to Forrester's report for 2008 to 2012, the IT companies growth is predicted at 5 percent CAGR, while for 1996 to 2007, there was 9 percent CAGR. This reflects that IT businesses are not doing well and lots of consolidation will be required in the industry,” he discussed.

Similarly, Mehta opined that overall scenario is weak and it will get reflected in Q3 and Q4 results in next six months time. “IT companies and its stocks will mark negative growth, so from business point its not favorable time for tech stocks and investors,” he concluded.

At large trading at both BSE and NSE sensex ended low. BSE sensex closed at 9107. 31 down by 299.16 points, while NSE sensex ended at 2768.70, down by 104.30 points.