Trades Higher, IT Stocks Drag

The Indian markets have erased their early gains to some extent at this hour. The Sensex is currently trading higher by 46.57 points or 0.24% at 19394.49 and Nifty is up by 9.50 points or 0.16% at 5898.75.

A rally was expected in the markets as they had opened on a positive note and were supported by a strong upward movement in the Asian stocks. However, technology stocks have weighed them down, resulting in a slow downward movement. Cognizant, in its SEC (Securities and Exchange Commission) filings, said that it will pay its executives 100% of performance-linked stock units if its sales expand by 16% in CY2013. The company had earlier projected a revenue growth of 20% in 2012. Cognizant being a consistent outperformer, Indian IT companies had been lagging behind the firm for a few quarters now. Due to the lack of optimism through these filings, the technology sector is now latching on to a larger sense of negative sentiment.

This has seen the BSE IT index going down by 1.13%. The share prices of HCL Tech, Infosys and Wipro have dipped by 1.16%, 1.65% and 1.91% respectively. Being heavyweights, these stocks have been dragging the broader indices down.

While the broader indices are higher by 0.20%, there is more strength seen in the BSE midcap and smallcap indices, which are trading higher by 0.57% and 0.78% respectively. The market breadth is also positive, with 1593 (56.93%) advances and 1101 (39.35%) declines. Of the 13 sectoral indices, only 3 are trading in losses, viz. Power, Teck and IT which are down by 0.34%, 0.88% and 1.16% respectively.

The highest gainers are Sterlite Industries, Hindalco and Tata Motors, up by 4.16%, 3.38% and 2.60% respectively.

There is a strong rally seen in the Asian markets. The Hang Seng, Nikkei and Shanghai Composite have gone up by 1.78%, 0.39% and 2.88% respectively. The Shanghai Composite jumped up from a 4-year low today as investors lapped up financial and property stocks. The buying has been seen as a result of expectations of a continuation of the supportive economic policy over the coming quarters although there was a recent change in leadership in China.

Overall, we expect the markets to remain positive due to the inherent strength and due to the supportive Asian cues.