IT SECTOR – GOOD, BAD OR UGLY

The Satyam scam is not even a week old. The skeletons continue to threaten falling from the cupboard of Satyam and there is no doubt that the confidence of the investor has now been literally beaten to a pulp. With the eyes of the world on India in the aftermath of this scam breaking out, what is commendable is the swift way in which the Govt has managed to swoop down and take control. Probably we have seen such speed from the Govt for the first time ever.
The new board with eminent personalities like Deepak Parekh of HDFC, Kiran Karnik and former SEBI member C Achutan has managed to repose some faith back. Wipro. Another biggie from the Big Four IT companies of India, Wipro disclosed that the World Bank had determined in June 2007 the company would be ineligible for the bank's direct contracts up to 2011 citing a conflict of interest policy. Wipro said its revenues from World Bank were insignificant and the decision would not affect its business and results.
ow does the IT sector for now?
One cannot beat the chest and say for sure, crying from rooftops that this is the sector to back! Satyam revival would depend on how the Govt goes ahead and one has to see if there is any company willing to takeover. After Wipro, the market, right now, does not know how many more companies would now come back with such damaging disclosures.
To a large extent, a lot would depend for the sector on the Q3FY09 results of Infosys, expected tomorrow. Though analysts are of the opinion that it might miss its guidance, even if the company manages to show a growth rate over 20% in the topline and bottomline, the sentiments would improve.
So if IT is your flavour, best to wait and see how Satyam goes ahead from here and how Infy manages to post its Q3 numbers. Mid cap and small cap IT stocks would mostly have no reckoning on the bourses.