Infosys a Safe bet for next 1 year - Nishit Vadhavkar

The Infosys results have been declared and the annual ritual of the next year guidance also has been given.

The guidance for the next year has been pegged at rs 82-83.

Infosys always beats its own guidance by a long margin. Taking a minimum 1 year view of the stock, at this time next year, a price target of Rs 3000 looks very realistic. That is assuming Infosys gives Fy09 guidance at 20 pc.

20 pc guidance for next year should not be too difficult for a company like Infosys which has moved into Consulting, its china operations have broken even.

Infosys may not be hot stock it once was, but as long as it continues delivering steady numbers, it should occupy a a sizeable chunk of one's portfolio.

I flex yesterday touched Rs 2360, a far cry from the open ofer price of Rs 2100. As I mentioned earlier, I flex is like opening a fixed deposit, there is virtually no down side.

In last week of December when recommended to to convert major part of portfolio into I-Flex it was trading at Rs 1880. A gain of 25 pc risk free.

The easy days of the bull market are over now. It is a stock pickers market. Over the next 1 year, its time to be very cautious.

I am still bearish on the markets and would wait at sidelines with i flex and cash and wait for the UP election results to come through. 1 more CRR hike seems to be on the anvil.

Large Deal Pros and Cons in Indian IT Services Context

As the President of commercial and healthcare businesses at Satyam Computer Services, Ram Mynampati provides business leadership in market segments such as BFSI (banking, financial services and insurance) and healthcare. In addition, he provides executive leadership to Satyam's relationship with GE, Satyam's largest client. Mynampati is also responsible for the retail, transportation and US Government vertical business units. He also spearheads Satyam's emerging business in Canada. In a chat with eWorld, he talks about Satyam's core business:

What constitutes a large deal for Satyam Computer Services and what is it that you look for in a large deal? Are large deals likely to be margin-accretive?

The minimum size associated with a large deal is $50 million (Rs 225 crore). The size and period varies but what categorises it as a large deal is the guaranteed and sustained revenues associated with it. I don't think large deals can always be margin-accretive to start with.

They might be margin-neutral at times, but not be margin-dilutive. This implies that for a fixed period we are guaranteed a certain flow of revenue, which further means that the cost associated with having to sell is not there. Second, large deals provide us with the freedom to mix and match competencies, resources and locations to meet client expectations.

As long as we see the predictability of revenues and opportunity to manage margins selectively, large deals will be a good fit.

In today's scenario, deal sizes are really getting out of hand. When do you know that you are not being opportunistic or tactical in choosing deals?

We are only six months old when it comes to large deals and only 5 per cent of our revenues come from them. First of all, we need to master the art of delivery of a large deal. I can grow large deals by 50 per cent, as these are only one-time fixes. If I get a large five-year deal, that client is not going to give a second five-year deal immediately. It's a one-time effort. As long as volumes are there and we are able to manage at least a margin neutral scenario, percentages wouldn't worry us much.

What are the other levers that will work well for you in the coming quarters? Apart from cost optimisation, what are the other levers that can enhance your margins?

I believe that from a margin perspective, the total cost of delivery can be managed much more efficiently than we presently do. Our first endeavour is to bring down the total cost of delivery of projects. Optimising the resources deployed in a project is a very important lever as it brings down the total cost of delivery. We have to try cutting costs and that can mean moving to tier two cities or relocating from the US to India.

What proportion of your revenues will come from new service offerings, apart from enterprise solutions, in which you have been a traditional leader?

Engineering services outsourcing (ESO) and infrastructure management services (IMS) contribute about 15 per cent to our revenues. We are looking at scaling that up substantially in the next 2-3 quarters (by 2007-end). ESO, in particular, looks very potent, as we have already invested in some interesting competencies.

Which verticals do you think will drive the next wave of growth for Satyam?

While verticals such as banking, financial services and insurance and manufacturing will continue to do well, the pharmaceutical sector is surely something to watch out for. In addition, retail and consumer durables have a lot of scope. Moreover, you can expect above average kind of growth from energy and utilities.

What strategy do you follow when it comes to acquiring companies in overseas markets?

For Satyam, acquisitions need to be strategic and complementary, otherwise they don't mean much. Acquisitions should help us to bring multiple competencies to the existing domains. We would never acquire companies to create a new market. All our previous acquisitions and the ones that we will be making in future are going to extend our value chain and not create new service offerings. We will not acquire product companies or companies that operate in distant markets such as Chile or Brazil just to anchor into these markets.

What to expect from IT Service Leader - Infosys

The first off the pack was iGate which said that their operating profit increased four fold due to better operating margins management and because they could achieve a rate above their goal of 15 %.

iGATE reported a net profit of Rs 22.6 crore on revenue of Rs 210.1 crore for quarter-ended March 2007 compared with a net of Rs 4.7 crore on revenue of Rs 210.8 crore in the preceding December quarter.

As far as company specific outlook is concerned, Phaneesh Murthy said "We are concerned about the mortgage meltdown as our revenues from loan fulfilment process have been adversely impacted. We expect the sluggishness to continue in the first quarter". But at the same time he agreed that CIO's world over are increasingly looking at offshore considering the fact that it saves money for the CEO's. So, the demand is going to be robust but specific instances like Mortgage meltdown would impact profitability to some extent.

Now, going to Mastek, it was an erractic performance as usual for the company. Mastek could increase the component of US Billing this quarter and Mastek could increase the revenue due to new customer billing in UK and Asia.

Total income for the quarter rose to Rs 214.79 crore from Rs 179.47 crore for the quarter ended March 31, 2006, the company said in a communiqué to the BSE. The company, on a stand-alone basis, has posted a net profit of Rs 57.33 crore for the third quarter as against Rs 12.29 crore for the previous corresponding quarter. Total income increased to Rs 134.73 crore from Rs 102.26 crore.

There was a one time profit on sale of a JV with Deloitte Consulting. But otherwise, the result was nothing to boost about.

Now, what to expect from Infosys -

Two factors which weight heavily on the guidance to be given by Infosys are Rupee Appreciation and Taxation.

Other important factor which has been clarified by many top rung IT Service providers and also from Cognizant's guidance for Calendar Year 2007 (Congnizant reports from Jan to Dec every year), there is a feeling that Infosys would be able to increase the volume and compromise a bit on margin front.

This means that the revenue guidance would be robust but the profit guidance would be affected by the above factors and the demand supply glut of the IT Employees in India which would necessitate Infosys to provide a better hike this year.

Overall, I feel the guidance should look better than what everone is expecting. Infosys giving a revenue growth guidance of more than 35 % and profit growth of more than 30 % would be viewed as a good sign for the overall IT Sector.

Infra management is the new hot spot

Infrastructure management (IM) services is emerging as one of the fastest growing service lines for IT companies spurred by falling telecom costs and web-enabled tools that make remote management easier.

Over the last one year, IMS has been growing at over 60% for companies like Wipro and HCL Technologies, almost double their total sales growth, which is around 30%. The practice is still small for most companies because it has started gaining momentum only over the last couple of years.

“Earlier, there was a reluctance to outsource infrastructure management. Enterprises preferred nearshore operations because the costs of telecom pipes were high.

Security was also a big concern but now resources can be managed remotely without having to download any data because of web-based platforms,” said Ram C Mohan, vice-president and head of infrastructure management & technical support services, Mindtree Consulting. Mindtree launched IM and tech support services about nine months ago because of the growth being witnessed in the area.

Infrastructure management refers to the maintenance and management of the infrastructure of any company. The recent Idea Cellular-IBM deal is one such example where infrastructure management was significant part of the total contract that was outsourced.

In the context of many of the Indian IT companies, IM refers specifically to the management of the IT infrastructure and includes services like network management, desktop management and application portfolio management.

“IM has been growing at 50% year-on-year for IT companies. The entire infrastructure is managed remotely at a network operating centre,” says Hitesh Zaveri, analyst with Edelweiss Securities.

He estimates that in FY07, Tata Consultancy Services (TCS) could see well over 100% growth in this segment touching about $ 250 million, while Wipro would see 70% growth to over $ 250 million. For Satyam Computer Services and HCL Technologies too, the growth is estimated at well over 60%.

“Last year Satyam saw IM services grow by 32%. This year it should be around 62%,” according Zaveri. Companies are increasing their focus on IM because it also provides them with a predictable revenue stream.

“Unlike projects, where the revenues are based on the duration of the project, IM provides annuity-based revenues,” said Mr Mohan. Typically, IM functions also require the companies to provide an IT help desk that provides voice, e-mail and chat support. About 10-20% of the staff may be involved in such support services.

Tech stocks could lose 12-15% in 3-4 weeks

The market is not looking to stabilise at a particular level. It is too volatile now a days. Since February, the Sensex has slipped over 8% and the Nifty by 7.67% till Monday, March 26, 2007.

In the same period, BSE IT Index lost 6.33%. Some technology stocks could lose 12-15% in the next 3-4 weeks, said Technical Analyst Gautam Shah of JMMS Technicals. He also believes that the next leg of the downtrend has begun.

In an interview with CNBC-TV18, Shah said, "I guess clearly there is something wrong somewhere in technology. Last week, you saw the Sensex gain 1000 points and Infosys just did not move. So I guess there is something on the charts, which suggests that some of these technology stocks could lose as much as 12-15% in the next 3-4 weeks, we are maintaining our view."

"Therefore, investors holding on to some of the technology stocks can either just get out, maybe buy back 15% lower or look to hedge their positions because technology and telecom, which have been the best performers in the last one year are likely to be the worst hit in the next few months", he suggests.

Today technology stocks have been hammered more than other stocks. The BSE IT Index is down nearly 3%, which includes, HCL Technologies is the top loser, down nearly 5.5% following TCS by 4.8% and Patni by 4.3%.

Stock	28-Mar-07	26-Mar-07	% Gain/Loss
HCL Tech	285.40	301.85	-5.45
TCS	1,201.00	1,261.25	-4.78
Patni Computer	373.30	390.20	-4.33
Wipro	562.00	586.15	-4.12
Satyam	453.95	472.25	-3.88
Hexaware Tech	159.20	165.10	-3.57
Infosys	2,001.00	2,057.00	-2.72
Mphasis	273.30	280.30	-2.50
Moser Baer	295.70	300.50	-1.60
HCL Info	134.00	135.65	-1.22

Investment Opportunities in IT Sector

Too many things have happened in too little time for the equity markets. And most of them unfavourable. The Budget did not please the industry and events in the international markets took a toll on the Indian markets as well. But in a crude sense, the Budget has let the IT sector free while bringing some of the high-growth industries like cement under the clutches of the regulator.

What makes IT stocks really exciting is the fact that the volatility of these stocks is in sync with the broad diversified indexes when compared to any other sector. Over the past one year, the S&P CNX IT Index is up by 25%, while the diversified Nifty is up by 12%. The IT Index has a volatility of 15% as compared to 12% for the Nifty. Considering the fact that the IT index has given double the returns of the Nifty over the past one year, it would be fair to assume that the volatility of the IT index would be almost double that of the Nifty at 24%. But the volatility of 15% for the IT index, at a time when bad news from overseas market is at its peak, is something that gives high comfort levels to fund managers.

However, contrary to what one would like to believe, investors had actually stayed away from this sector with the exception of Infosys and TCS. Over the past one year, TCS is up by 34% and Infosys is up by 42%. The other three Tier I companies — Wipro, HCL Technologies and Satyam Computers — have returned a growth between 3% and 10%. Momentum investors were busy cashing in on the construction sector, which at its peak level, was trading at a historical P/E multiple of around 400-times for some stocks. But now with the fall, valuations look real and the IT sector is expected to be back on investors’ radar.

Analysts are advising to buy low-risk IT stocks in terms of their betas. Beta is a measure of risk, where higher betas are considered risky. This, typically, means that investors need to stay overweight on Infosys and TCS since they have low betas at 0.95 and 0.86 and get out of Wipro, HCL Technologies and Satyam Computer whose betas are above 1. Incidentally, these other three stocks have lower P/Es of around 15 times when compared to Infosys and TCS at around 25-times. But since these stocks also have very high risks against the broad index, fund managers do not find their low P/Es attractive.

Buying this sector at a time when the companies are brought under MAT and stock options under FBT does not sound like a good idea. Even though the introduction of the tax is negative for the industry, the prices of these stocks are now adjusted for this change.

IT stocks fell by around 6-7% on the Budget day to accommodate for MAT, which is equivalent to the growth rate of the industry at 30%. The worst is over for the sector, and this is probably one sector that will maintain its growth rate of around 30% without any hiccups for the next few years to come.

Being overweight on IT makes sense as a recent survey of global chief information officers shows that the coming year will see a technology spending of 5-7%, which is in tune with the last year when spending had gone up in the same range of around 5%.

Tier I firms are reinventing themselves and moving up towards system integration and consulting. They are concentrating on higher value services so that margins can be maintained. The reason why IT will work for India lies in the fact that among emerging markets, only India has such high exposure to IT stocks. IT stocks are expected to be the safest bet as long as the world economy is growing and the rupee is stable against the dollar.

Tatas eye Deutsche Telekom's IT unit

In line with its strategy of global expansion through acquisitions, corporate giant Tatas are reported to be in advanced stages of talks for buying the IT business unit of German telecom giant Deutsche Telekom.

Tata Group is currently studying the books of Deutsche Telekom's T-Systems unit. Tatas are planning this deal through the European unit of Tata Consultancy Services, German business weekly 'Focus Online' reported on Thursday.

T-Systems is one of the smallest units of Deutsche Telekom. It had reported a revenue of 12.5 billion euro (about Rs 73,000 crore) last year and has a total workforce of over 55,000 people.
When contacted, a TCS spokesperson in Mumbai said the report was completely speculative and the company did not comment on speculations. Officials from T-Systems or its parent company Deutsche Telekom could not be immediately contacted for comments.

According to the Focus Online report, Tata Group's talks with T-Systems follows months-long negotiations held by other two Indian IT giants - Infosys and Wipro - for a stake in the German company.

If successful, it could be another deal after Tata Steel's Corus acquisition when a Tata Group company would acquire a company of much larger size.

TCS had reported consolidated revenue of about Rs 13,500 crore ($2.97 billion) in 2005-06, which is below T-Systems' annual revenue in 2006. Tatas also have a strong presence in the Indian telecom sector through its companies Tata Teleservices Ltd and VSNL.

Deutsche Telekom had reported annual revenue of over $61.35 billion (about Rs 2,75,000 crore) in 2006. Deutsche Telekom AG is an integrated telecom operator while its wholly-owned subsidiary T-Systems is a leading provider of information and communication technology service offerings with presence across more than 20 countries.

T-Systems' offerings include a full range of consulting and outsourcing services. It also provides telecom services for international carriers and corporate customers in sectors across the board.

Satyam scouting for $50m buyout

EVEN as it has quashed persistent market speculation about a takeover by a global IT behemoth, Satyam Computer Services says it is scouting for up to $40-50 million acquisition in the IT consulting and telecom space in the US and Europe.

“We plan to go for niche small buyouts with a ‘string of pearls’ acquisition strategy rather than a transformational merger and acquisition that involves large buyouts. We are interested in profitable companies,” said Satyam Computer Services chief financial officer Srinivas Vadlamani.

Satyam, which is sitting on cash reserves of Rs 3,500 crore, had announced the acquisition of the UK-based-specialised business and systems consulting firm, Citisoft, in April 2005, in a deal involving guaranteed payment of $23.2 million and an additional performance-based payment of up to $15.5 million.

India’s fourth largest software company then followed it up with acquisition of Singapore-based Knowledge Dynamics, a high-end consulting solutions provider in Business Intelligence, in an all-cash transaction involving a consideration of $3.3 million and additional $2.2 million as earn out payments based on certain set revenue and profitability targets.

“We have considerably strengthened our consulting practice and currently 5% of our revenues come from IT consulting. In addition, we are also looking at buyouts in the enterprise business solutions space. An acquisition in the telecom space could bring domain expertise in areas such as billing,” Mr Vadlamani said.

Mr Vadlamani said that Satyam was in talks with 5-6 companies at this point, but was yet to conclude a deal. Earlier this year, Satyam - which has been the subject of market rumours over a possible takeover by a large global System Integrator (SI) - had denied having considered such an option directly or indirectly in the past.

Satyam chairman B Ramalinga Raju had said that the company believed that enhancement in shareholder value was best when it continued to pursue Global Delivery Model that it specialised in. “Satyam, therefore, shall not indulge in any such pursuits of being acquired. We would continue to focus on aggressively expanding our business globally as an independent company,” Mr Raju had said.

Comonwealth Bank Outsourcing

THE Commonwealth Bank will put one of the country's most sought-after software services contracts on the market over the next few months, but India's big guns of outsourcing seem likely to have an uphill battle to secure a piece of the deal.Commonwealth chief information officer Michael Harte said he had spoken to most of India's top services companies, but he still had reservations about tapping the firms for the bank's planned software services panel.

The bank's existing applications maintenance and development outsourcing contract expires in October as its $5 billion, 10-year technology services agreement with EDS ends. The EDS deal will be replaced by a panel of software services suppliers under long-established plans.

The bank is yet to call for bids for the panel. "We talk to all the usual people: Tata, HCL, Wipro, Satyam, Infosys, the works. They're all knocking on our doors," Harte says. "We continue to talk to them because we wish to understand not only their capability but also how you would go about working with them in the event we were in a position to move in that direction.

"At the moment we're still concerned about the scale of the work we can send and we're not that interested in doing it for economic reasons only." Harte says the bank's chief concern was quality of service, not the cost saving that could be reaped from using traditionally cheaper destinations such as India or The Philippines.

The bank is struggling to find a clear advantage in using Indian service providers, as opposed to US multinationals such as IBM, EDS, Computer Sciences Corporation and Accenture," he says. "We still haven't been able to make it stack up on an economic basis. "We haven't been able to make it stack up on a risk-weighted basis, and we haven't been able to make it stack up on a quality of service basis."

Harte says the bank's position could change over the next six months as the end of its current outsourcing agreement approaches. He also notes that multinationals with longer track records also have offshore facilities and outsourcing to lower-cost destinations through firms such as IBM and Accenture appears to be less controversial.

"There doesn't seem to be the same level of negative sentiment with those providers, but be that as it may, we haven't formally engaged with either IBM or Accenture, although they're just as active in their campaigning," Harte says. Other offshore options that the bank is exploring include using applications development and business process management resources in regional banks that the Commonwealth has invested in.

Such a move would take the Commonwealth down a similar path to the ANZ Bank, which uses offshore resources that it owns to augment local technology skills. "We've done a lot of work to understand having our own capabilities in the region.

"We have interests in two Chinese banks and we've just bought another Indonesian bank, so we have a more scalable business operation in Indonesia," Harte says. "As our product and services portfolio increases in the Asia region we would look to fulfil application development and application maintenance and processing support in those banking investments."

The bank has yet to take up that option, but skills and work exchange would be a two-way street, Harte says. "We're trying to create more new jobs and the exchange of people would involve some of our experts and executives going into the Asian region. "We would try to hire and train more graduates here," Harte says.

Software solutions provider Dynamic Vertical Solutions in tie up with Reliance Retail

Software solutions provider Dynamic Vertical Solutions (DVS) has said it is in talks with Reliance Retail for offering end-to-end products related to accounting operations and inventory management among other things.

"We are in advanced talks with Reliance Retail for offering them our end-to-end solutions on accounting operations and inventory management and hope to strike the deal soon," DVS Managing Director Rakhi Nagpal told media.

She, however, did not disclose the size of the deal saying the company would be able to provide the numbers only after the deal is finalised. The company is in talks with other retailers and real estate developers as well for providing its software solutions.

"We are in talks with some of the other big retailers and real estate developers and would soon finalise the deals," Nagpal said, adding that the company would be increasing its headcount to 200 from the present 50 by next year to meet the needs.

DVS is also planning to venture into the retail education business to fill the demand-supply gap in the industry and has tied up with the Indian Retail School in this regard.

The company also plans tie-ups with some of the best management schools of the country, including the IIMs for enriching their courses with retail management.

"Presently almost all the B-schools provide specialisation in finance or IT but their is no specialisation on the retail front and we want fill that gap," she added.

Aviation Outsourcing - next big for IT Service Providers

The global aviation market is set to rain large deals on Indian companies. A CLSA Asia-Pacific study shows there will be a $18-billion business opportunity over the next five to seven years. This demand has resulted in Indian aviation companies ramping up their headcount.

Public sector aviation giant HAL is looking at hiring no less than 800 engineers by 2007-end. The company is sitting on an orderbook of Rs 35-45,000 crore.

“We need more people to execute the strong orderbook. In the last two years, HAL has added close to 1,800 engineers and this year too we are hiring aggressively. We have already begun visiting several institutes like IIT and NIT,” says Sanjeev Sahi, director-Personnel, HAL.

According to industry estimates, in three years, more than 1 lakh jobs will be created in the engineering services industry alone, including aerospace in India. Software majors like Wipro, Satyam and SMEs like Quest and CADES are also looking at increasing their headcount significantly by the year-end. Wipro, which currently has 450 engineers in its aerospace division, is looking at doubling its headcount in a year. “We would also be aggressive in lateral hiring of engineers who have exposure to aerospace projects across the globe,” says VR Venkatesh, Sr VP-Embedded System, Wipro Technologies.

Satyam, too, is looking at increasing its headcount, however, the company declined to provide the exact numbers. Pinaki Dasgupta, global head, Satyam Aerospace and Defense Practice said, “Satyam business in aerospace is expected to grow at a very fast pace given the buoyancy in the global commercial aviation, aerospace and defence markets. The hiring plans would be commensurate and in guidance to the expected growth rate.” Mr Dasgupta adds, “Satyam has made three critical investments to strengthen its aerospace and defence vertical with the setting up of an aerospace engineering center of excellence in Bangalore, one such center on avionics in Chennai and RFID labs in Chennai again.”

French aerospace major Safran, which has its largest R&D centre in Bangalore outside France is also looking at total headcount of 1,100 by 2010. Currently, it has 400 employees in its aerospace division and its expects to hire 150 engineers by 2007-end. Quest and CADES are also hiring 150 and 500 aerospace engineers respectively. “Aerospace market is growing 30-40% year-on-year. Our long-term recruitment plans will be commensurate with that,” says Natarajan Iyer, VP-HR, Quest.

As with most rapidly growing sectors, the aerospace sector, too, is facing manpower crunch. In a bid to tackle this issue, most of these companies have collaborations with academic institutions to develop a future quality talent pool. Safran is exploring partnership possibilities with Indian and French universities.

Quest runs its own training academy CADAM (Centre for Advanced Design and Manufacturing) at several engineering colleges in India. Mr Venkatesh says, “Wipro has collaborations with major Indian institutions to develop prototypes in different technology areas. We will be leveraging upon these collaborations to attract the best engineers to work with us in Aerospace.”

Views on whether IT Sector is still good

Information technology sector has been a consistent player in the calendar years 04-05,05-06 and 06-07. The sector has been giving returns in the range of 51.37-32.69% as compared to sectors like capital goods, consumer durables, FMCG and pharma.

But the current scenario does not look too exciting for the sector. Between February 12 and yesterday, IT was one of the worst hit sectors. It fell by 11.1% with stocks like Financial Tech losing gains by 18.50%, Infosys by 14.63%, Wipro by 14.60% and Hexaware Tech by 14.15%.

The weak trend still seems to be continuing as it pulled the markets down in afternoon trade. IT sector was considered a defensive sector by analysts as it is a sector which is not impacted by factors like inflation and interest rates. The only risks can be any slowdown or uncertainty in IT spend in the US which is the largest market for Indian IT services and any significant appreciation of the rupee vis-à-vis the dollar which will be detrimental to margins of IT service companies.

Budgetary proposals also played the spoilsport for the sector. Proposals like 11.2% MAT and non-extension of STP benefits beyond 2009, did not go down well with the companies. Analysts feel that these are likely to have a negative impact on medium and smaller sized companies more than on large cap IT companies.

So, has the IT sector lost its charm? Experts are divided in their opinion. Some consider the sector still attractive while others feel that the sector will be on a downtrend for some time now.

Experts like Gautam Shah of JMMS Tech believe that tech stocks may see a further slide. Shah, said, "I guess for current levels, we could see a 15-20% drop in the stocks that have done well in the last few months. Hence any pullback, if it continues in the next few trading session, will definitely be a sell on technology."

While Sudarshan Sukhani believes that one can still make money in IT stocks with a long term perspective. He said, "IT was always a favourite sector and the first move should have come from that sector and which it did. I would still feel that at some point, it would be wiser to pay attention on the midcap IT space, where bigger moves are possible. But given the condition of market, these moves should be sustained and somebody who can actually buy on a dip, keep a stoploss, should still make money on the long side."

Narayan Ramachandran, MD of Morgan Stanley, is also in the latter group of experts who feel IT is still a strong sector. He said, "We are into the cycle and the temptation is constantly to dip into smallcaps. But one of the things I have learned over the years is try to refrain from that temptation, except when it is completely down and out and at the bottom of the cycle.

So in the middle of the cycle, I think the key operative words would be find stocks that have earnings visibility, earnings stability and sort of a business model that can carry them not across only this cycle, but across futures cycle as well. That’s where companies like telecom, technology stand out."

Even though at the moment there are negatives playing in the sector but it is believed that the sector is bound to get stronger and stronger. According to Emkay Shares and Stock Broker's research report, IT sector is well poised to cross USD 60 bn by 2010.

According to the firm, the enviromrnt is getting more robust and companies with strong business model and niche offerings, are well poised to reach the higher growth trajectory in the coming years. Hence, with no structural changes in the Indian IT sector fundamentals, they maintain their bullish stance on the sector for the year ahead.

Their top picks are Infosys, Paradyne Infotech,Tata Elxsi, Tanla Solutions, NIIT Technologies, Tech Mahindra.