Satyam might remain underperformer

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Satyam might remain underperformer

Long road for Satyam, maybe the stock will stabilize just below Rs 200. And maybe there is not too much downside because the stock is at Rs 160 and is trading at about just 5 PE. Given the cash on the books one will not hammer it down to 2 PE. But in any kind of move it might remain a sector under performer.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other CNBC-TV18 anchors have to say Mahindra Satyam BSE | NSE 25/05/12 Are Mutual Funds betting on Mahindra Satyam?

Here is a verbatim transcript of Udayan Mukherjee's comments on CNBC-TV18. Also watch the accompanying video.

Satyam is a de-rated stock now and that is the word which describes it the best. There is a buyback announcement and they will try and salvage some part of what has been lost with a generous buyback programme. And that might well support the stock for a bit but the market is de-rating Sataym right now. We keep talking about these valuation differentials between Infosys, TCS and the rest of the technology pack.

When you see instances of what happened last week you know why the market gives in its wisdom these kinds of valuation differentials. The market's way of dealing with these things is quite ruthless, it doesn't shriek, it doesn't shout and that dust will settle in another weeks time. What the market will do now is say, "Okay on past performance before last week I gave Satyam a PE of 9 or 10 but now it will be 5 to 6 because Satyam has fallen in its investors eyes and we don't know what it will do or what its capable of doing after what it did last week". This credibility and trust thing takes years to built but it just goes away in 24 hours and that is what Satyam will have to deal with now.

So long road for that company, maybe the stock will stabilize just below Rs 200. And maybe there is not too much downside because the stock is at Rs 160 and is trading at about just 5 PE and given the cash on the books you will not hammer it down to 2 PE. But in any kind of move it might remain a sector under performer and probably be a de-rated stock in that sector.