Infosys investors loose Rs 10,000 cr of weatlh

Ditto is the case with other tech majors. Wipro market cap lost Rs 7,000 crore to Rs 21,600 crore in the selling avalanche in tech counters. Satyam shareholders lost Rs 1,000 crore. When the week wound up, shareholders of high-profile technology stocks were counting their losses.

Shareholders of Infosys Technologies were the most affected by the blast triggered by the guidance missile. Infosys stock fell by 39.13 per cent to Rs 2,617.50 became the biggest loser among frontline tech stocks.

Earlier, in the beginning of 2001, Infosys and other tech stocks bore the brunt of severe hammering when global tech stocks crashed and the securities scam surfaced. Many investors who bought tech stocks at high levels in 2001 are still nursing wounds.

“As usual, the market was banking on the guidance from Infosys Technologies to set its future direction. But the investors’ high expectations were belied when the software bellwether came out with a cautious forecast,” said stock dealer RA Podar. The Infosys warning led to a selling spree, especially in frontline tech stocks on Thursday and Friday.

Apart from shareholders and mutual funds, another tribe which got hit by the Infosys missile was brokers. As the Infosys stock plunged, brokers had to provide for additional margin with the exchanges. Their liquidity position worsened when all frontline technology stocks plummeted in which they had positions. Some banks also sold Infosys and other stocks pledged as security.

“The US economic recession, challenging external environment, pricing pressures on outsourcing deals, competition and uncertainty due to the incidence of SARS disease as also the US-Iraq war are being cited as responsible for the muted earnings guidance from Infosys,” said an analyst. Though analysts reel out many reasons for the crash, many retail investors are yet to digest the realities behind the fall.

“It came like a missile… without a warning,” said R Subramaniam, another investor who suffered a severe loss in the Infy crash.

The total market capitalisation of the Bombay Stock Exchange fell by a whopping Rs 25,000 crore on Thursday and Friday. A major chunk of this loss was accounted by technology stocks. The BSE IT Sector Index crashed by 388.58 points, or 27.87 per cent, to end the week at 1,004.99.

Like Arun Kumar, many mutual funds also suffered huge losses as most of them have a huge exposure in tech stocks, especially Infosys. Net asset values (NAVs) of tech funds like Franklin Infotech, KTech, UTI Software Fund etc fell by nearly 15 per cent. Many foreign funds which had a huge exposure in tech stocks have started cutting their exposure.

According to merchant bankers, the crash in IT stocks will dampen the fund-raising plans of tech companies. “Companies like TCS which had planned initial public offers (IPOs) will have to wait for the storm to blow over,” said a merchant banker.

The million dollar question is: Will there be a recovery now? Nobody is sure.