Indian IT services stocks outstrip Western giants
By Our Corporate Bureau | 12 Oct 2006
Mumbai: According to London-based independent market analyst Datamonitor, shares in the major Indian IT services providers have vastly outperformed their Western rivals so far this year, despite falling sharply in May and starting from valuations based on much higher multiples of earnings and revenues.
"The share prices of the largest four Indian based vendors (Tata Consultancy Services, Infosys, Wipro and Satyam) all increased by double-digit percentages, a feat that none of the five largest US service providers managed, and only one of the largest five European players, Capgemini, achieved", said Patrick O'Brien, Senior Analyst for Global Computing Services at Datamonitor.
"Our research has shown that overall shares in IT services companies have offered a poor return on investment in the first three quarters of the year, with overall increase in prices of less than 3 per cent, far less than most of the capital markets' indices," he said.
Datamonitor's integrated news and research service Global Computing Services MarketWatch analysis service tracks the share prices of 43 of the largest IT services companies with the GCS Index and is updated weekly. The GCS Index tracks the health of IT services investments by following the share price movements of 43 of the largest companies in the sector. With its starting point of 100 at the beginning of the year, it rose sharply in the opening months to reach a high of 105.8 in early May before macroeconomic factors, regarding interest rate fears, caused it to dive to 91.7 in mid July.
While the GCS Index shows that IT services investments have been easily outperformed by the Dow Jones Industrial Average, the S&P 500 and the NYSE Composite Index, the reverse is true over the last three months, as the GCS Index has bounced back strongly from 96.2 at the beginning of the quarter to 102.8 at the end of September.
Of three regional indices which track the top five IT services companies in India, US and Europe, the Indian Top Five has risen to 117 over the last nine months, while the US Top Five has struggled to 98.3, and the Europe Top Five index barely breaking even at 100.4.
