 "Mid, small IT stocks extend rally; Smartlink Network, Datamatics, Tanla Solutions hit 52-week high")
Extending gains for the second session in a row, shares of many mid and small-sized information technology (IT) firms jumped up to 20% on Monday, even as experts believe that barring a few stocks, which are gaining on cashless drive, the rally in others was speculative and may not have legs.
“I don’t see any particular reason why smallcap and midcap IT stocks are going up. It is a market-driven, speculative rally, which will cool off in a couple of days,” said Kishor Ostwal, CMD, CNI Research.
On Monday, shares of Rolta India, Allied Digital Services, Intense Technologies, Aurionpro Solutions, D-Link (India), Smartlink Network Systems, TVS Electronics and Bartronics India surged between 10% and 20% on the BSE.
Smartlink Network Systems, Bartronics India, TVS Electronics, Tanla Solutions, Datamatics Global Services and HCL Infosystems are from IT software and hardware sectors hit their respective 52-week highs on the BSE in intra-day trade.
This is at a time when largecap IT stocks such as Infosys, Wipro and TCS got battered by up to 2% in intraday deals after US President-elect Donald Trump on Friday pledged to stop companies from abusing the visa process for foreign workers.
A K Prabhakar of IDBI Capital believes stocks of companies like D-Link (India), Smartlink Network Systems, Rolta India, Allied Digital Services etc have gone up thanks to push to cashless economy following demonetisation, which will lead to more people using internet and Wi-Fi.
However, the expert is bullish on largecap IT stocks, and advised to book profit in small and midcap IT stocks.
“People holding all the demonetisation stocks should book profit and buy quality frontline IT stocks because after a certain point of time, such news becomes valued in the stocks,” said Prabhakar.
He believes the Trump news is negative for large-cap software companies just on the face of it, and the impact on the net profit will not go beyond 2-3%,” said Prabhakar.
“As far as valuations are concerned, largecap IT stocks are trading at 14 times their forward one-year P/E levels, which look attractive to me,” he added.
At present, the BSE IT index is trading at 16.15 times its trailing 12-month Earnings per Share (EPS). It settled Monday’s trade at 9774.47, down 0.41%.
Rolta India hit its upper circuit of 20% at Rs 65.55 on the BSE on back of an over 10-fold jump in trading volumes.
The company, a leading provider of innovative IP-led IT solutions for many vertical segments, including Defence/HLS, reported a strong 91% year on year jump in its consolidated net profit at Rs 54.30 crore for the second quarter ended September 2016 (Q2FY17). It had profit of Rs 28.38 crore in the same quarter last year.
D-Link (India) soared 17% to Rs 117, extending its Friday’s 16% surge on the BSE. The company engaged in networking products business had posted net profit of Rs 7.12 crore in Q2FY17 against profit of Rs 3.44 crore in Q2FY16.
TVS Electronics hit a record high of Rs 221, up 10% on the BSE. In past 14 trading sessions, the stock appreciated more-than-doubled from Rs 91 on November 22, as compared to 2.3% rise in the S&P BSE Sensex.
The company had posted 60% YoY growth in net profit at Rs 2.16 crore in Q2FY17 against Rs 1.35 core in a year ago quarter.
| COMPANY | LATEST | PREV CLOSE | GAIN(%) |
| ROLTA INDIA | 65.55 | 54.65 | 19.95 |
| ALLIED DIGITAL | 42.60 | 36.95 | 15.29 |
| D-LINK INDIA | 113.60 | 99.85 | 13.77 |
| INTENSE TECH. | 132.10 | 117.40 | 12.52 |
| SMARTLINK NETWR. | 118.65 | 105.90 | 12.04 |
| SANKHYA INFOTECH | 31.00 | 27.95 | 10.91 |
| AURIONPRO SOL. | 165.50 | 149.65 | 10.59 |
| TVS ELEC. | 220.90 | 200.85 | 9.98 |
| BARTRONICS INDIA | 21.80 | 19.85 | 9.82 |
| TERA SOFTWARE | 115.75 | 106.15 | 9.04 |
| R SYSTEMS INTL. | 61.05 | 57.70 | 5.81 |
| INFORMED TECHN. | 24.95 | 23.80 | 4.83 |
| DATAMATICS GLOB. | 100.10 | 95.60 | 4.71 |
| R S SOFTWARE (I) | 123.75 | 118.20 | 4.70 |
