The I.T bulls stomp on

The Indian stock market the Sensex has risen sharply by more than 5% over the last 2 trading sessions alone.

Catalysing this rise was the optimistic forecast provided by Infosys for the next fiscal year.

What has happened(as it often does) is that the entire SECTOR rises along with the market leader. This is because the leader often acts as a bellweather for the entire sector. As a result other I.T majors have also risen sharply over the last 2 days.

I took a look at basic statistics for major I.T companies that trade on the US exchanges: (PEG = P/E divided by expected growth rate for next 5 years)

IBM: Revenue 91 bilion, PEG ratio 1.34
EDS: Revenue 19.76 billion, PEG ratio 3.38
Accenture: 17.84 billion, PEG ratio 1.30

Infosys: Revenue 2.01 billion, PEG ratio 1.14
Satyam: Revenue 102 million, PEG ratio 2.79

The market seems to be highly optimistic for these I.T firms -- more so for EDS and Satyam than the others. Since Satyam is relatively small, it has a lot of room for growth. However, I would be cautious about a 20 billion company with a valuation that assigns a multiple of 3.3 to it's expected growth rate in the future.


Happy investing