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It has been a nagging worry amongst Indian investors that their returns would be unduly affected by the happenings on the international stock markets on which they have no control. The Nasdaq continued to fall during the last week in a prolonged correction phase. So far, the impact on the Indian stocks has been subdued. When the markets reopen next week, there is a lurking fear that the Indian markets may also move down not withstanding the good corporate performances that have been trickling in. The performance of foreign stockmarkets such as Nasdaq or NYSE affects the Indian markets in two ways. Firstly, those Indian stocks whose counterparts are listed in USA as equity or ADR/GDRs tend to be directly affected by factors that affect other local stocks in USA. This is because of the psychological association between the two parts of the same stock, even though the two may technically be different. Secondly, the FII s today have a huge stake in the Indian markets and their behaviour has its own impact on them. The FII s maintain sectoral exposure limits and country exposure limits besides controlling their investments based on liquidity requirements. These considerations affect their investments in India for reasons apparently not connected with the performance of the Indian companies. In the light of these developments we may try to analyse how the markets may move next week. A point to note with some satisfaction is that during the first 12 days of April, FII s continued to be net investors in the Indian markets. They had increased their commitments in India to the extent of Rs 2022 crores during this period. This demonstrated that the confidence of the FIIs on the Indian stocks has not diminished till now. Similarly, the impact of the downward trend in the foreign markets on the stocks listed in India is under check because there is no free flow of stocks across the borders. Some people have been demanding that there should be full fungibility for the shares listed in India and abroad. Fortunately, this is not available at present and this has so far helped the Indian stocks to weather the storms in USA or the South Asian Markets. We can therefore look with some hope that the markets may hold on their own in the coming week. Another significant development during the last week has been the interest shown by Germany to create a software industry with the help of Indian software professionals. This may mean that the prosperity which Indians have reaped in the Silicon Valley, may, to some extent be repeated in Germany. In the mean time, Nasscom has in a study of the Indian software industry has estimated that there are nearly 75000 additional IT jobs in India to be filled up every year. These clearly indicate that the Indian software and related industries still have a lot of steam in them. In this context of growing demand
for software professionals in India and elsewhere, NIIT as the premier
Computer Education Company in the country appears to be an excellent investment
opportunity. This 9-year-old company has been a showpiece of consistent
growth as the accompanying table indicates. The turnover and the netprofits
of the company have grown steadily from Rs 149.70 crores and Rs 33.61 crores
in 1995 to Rs 581.33 crores and Rs 142.81 crores in 1999.
Growth Profile of NIIT (Rs in Crores)
Although the predominant image of NIIT is that of a Computer education company, in the past few years, NIIT has significantly restructured its business and converted itself into a major software development house. Leveraging on its unique position to spot budding software professionals at an early stage the company has now setup several software development centers including a major Export setup in Chennai. During the first half of the year 1999-2000, (Period ending march 31, 2000) NIIT has logged in a global revenue of Rs 563 crores (inclusive of subsidiaries). This included software solutions revenue of Rs 337 crores which formed nearly 60% of the turnover. The profit after tax also zoomed from Rs 28.51 crores in the corresponding period last year to Rs 55.29 crores showing a period wise jump of nearly 94 %. With substantial new orders from USA in the field of E-Commerce, the company is set to grow further in the coming days to come as a software major. The shares of the company are presently quoted around Rs 2150 and hold substantial promise for appreciation. It’s unique profile as a premier international computer education company and a software solution provider makes it a must hold for every investor, small or big, conservative or aggressive. Na.Vijayashankar 15 th April 2000
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