Indian stocks slide on software results

Infosys was the first Indian company on the Nasdaq

By Sanjeev Srivastava in Bombay

Indian stock markets have slumped after software giant Infosys Technologies signalled a steep fall in revenue due to the downturn in the US economy.

Infosys, considered a benchmark for the IT industry, declared a sharp slowdown in growth and profits for the first quarter of the current financial year.

Infosys chairman played down the results

Bangalore based Infosys, which was the first Indian company to list on Nasdaq in March 1999, projected only 30% growth in revenues, compared to phenomenal growth in previous years.

The announcement by Infosys chairman NR Narayana Murthy led to a sharp fall of 16% in the company's stock.

In a statement, Mr Murthy said that Infosys would "try and put all the ingredients - whether it's people, physical and technical infrastructure and an excellent sales force - for a higher growth rate in place".

Shock effect

The results have come as a big disappointment to leading market players.

And analysts have criticised an announcement by the company that it would give a 15% pay-hike to its staff.

"In times like these we expect companies to be more bothered about their shareholders rather than their staff," John Band of the brokerage house, ASK Raymond James, said.

The news led to a crash of software stocks

"This is a time to cut costs and increase productivity," Mr Band said.

The profit warning by Infosys - which has a staff of about 9,000 software engineers and a slew of Fortune 500 clients - also dragged down the prices of most other software companies listed on Indian stock exchanges.

Stocks of frontline software companies Wipro, Satyam Computers, Software Solutions and a host of others also closed 16% down on Wednesday.

Analysts say the drop in share value may continue for some time as Infosys' projected results confirmed the worst fears of the domestic software sector.

The global slowdown being witnessed in infotech spending - particularly in the US where clients of most Indian companies are based - is now almost certain to hit India quite hard.