IT stocks back on track

The broken, beaten down IT stocks have once again shown strength and have attracted decent attention of investors in last two days of trading. IT stocks have been buzzing for last two days on the back of recently announced decision to accelerate the implementation of the third phase of the recommendations of the Committee on Fuller Capital Account Convertibility (CFCAC) with regard to the foreign exchange outflows. The analyst are of the opinion that this liberalisation will not help the IT stocks much. In this regard, the big question is how long will this rally last?

RBI has now permitted Indian companies to invest in overseas Joint Ventures up to 400 per cent of their net worth under automatic route. The existing limit for prepayment of External Commercial borrowings (ECBs) without the Reserve Bank approval has also been increased from USD 400 million to USD 500 million. IT companies reacted sharply on these liberalization of forex rules, however few analyst are of the view that they will not be of much help to the IT companies which has been badly beaten down on the back of sharp appreciation of rupee over the past one year. Rupee has appreciated over 15% against US dollar since September 2006 and is currently hovering near 39.7 against a US dollar.  

Meanwhile, bellwether Infosys has jumped nearly 8% in last two days of trade and ended today at Rs 1911.75. The biggest gainer in the IT pack was HCL Technology which witnessed over 9% gain during the same period followed by Satyam, Patni and Tech Mahindra. The prices of other leading software giants like TCS and Wipro has appreciated by nearly 6% on the bourses.