|
notjustinfo.com |
||
|
|
Knowledge centre for MBA students. |
|
|
|
IT Stocks: Up, Up and
Up... Senthuran In secondary capital market, stock price
movement of any scrip depends on the following : financial
performance of the company, industry performance, dividend/bonus record
and market preference. The above factors can be assessed through the
information, which is already available. However, another crucial factor
which determines share price of any company is its future growth
potential. That is a share price will move either upwards or
downwards depending upon the future outlook of the industry and
company. During the last millennium - especially the last decade -
IT stocks were much preferred by the stock market
investors (primary as well as secondary) since these companies
had a bright future, thanks to the Y2K issue. Further, compared to other
cyclical industries (sugar, cement, for example), IT companies
had a regular flow of income. Another advantage Indian IT stocks
enjoyed was the global cost benefits, since India has the world's
second English speaking population with relatively
cheaper manpower. This made most of the overseas
players to source their IT needs (specifically
software) from India. Another indirect reason for the IT stock preference was
the Indian government's, (both central as well as states) thrust
support provided for the IT industry. Specially, five Indian states
(Maharastra, Andhra Pradesh, Tamil Nadu, Gujarat and Delhi) started
promoting IT in a competitive fashion and in the process developing
specific IT Parks in the country. Now that the Y2K theme is slowly fading away, the future
of IT stocks were in crisis. In fact, many projected a downward journey
of these stocks. However, It stocks disproved the predictions.
(There were small falls during early January 2000.) Why and how? Though the Y2K projects are almost over, IT companies are finding other fruitful areas to function and sustain. IT companies find telecom, internet, e-commerce, insurance, e-banking, entertainment, education etc. to be the new big growth areas. There can be found huge potential for IT companies in the above areas. This is one of the major reasons for the IT stocks gaining the same favour for the stock markets, not only in India, but all over the globe. The fact is that IT firms swiftly changed the focus without leaving any time gap for transition, thus, the remain as the preferred flavour of the market players. Another reason for IT
company shares to gain importance is that, many bulk
players like financial institutions and mutual
funds prefer IT stocks. In fact, few mutual funds
have created special IT-based funds. Thus, IT stocks remain as a
darling of investors in this millennium too, as long as there can be found a
craze for technology stocks. |
|