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Thursday, January 8, 2009

Satyam Computers Stock - Ramesh Damani's View

There is an impact on Satyam stock, on the market for a quarter or so but one thing I am clear about is that it will not have a long run permanent impact on Indian technology.

Q: Just marry this with what the market will take away from it because the big fear is that now there will be a prolonged impact on sentiment because of the enormity of this kind of a corporate governance issue. How do you see things shaping up for market and the takeaways from this Satyam episode?
Ramesh Damani: I think the first thing is that the rally that we were talking about even as early as this morning is now punctuated or at least postponed. So I don’t think this quarter we should be able to cross the high of 10,500 that the Sensex made early morning today. So that is the high water mark for the Sensex.

In terms of Satyam, I agree with Shankar Sharma that someone could bottom fish and make a few bucks on it but it is pointless. For some reason in India stocks don’t go to zero even when the companies bankrupt, even when they languish for years. So it will probably not go to zero but there is very little business that you could salvage of it.

Checkout: Satyam Stock Disaster - What's Ahead?

There was talk on your channel and other channels of some sort of government bailout taking place which is hogwash. Clearly we don’t want to put tax payers’ money into company that has failed and that has cheated its customers and its employees, so why should we bail it out?

Lot of the MNCs were playing Infosys and Satyam and were trying to get cheaper rates but they must realize that when you pay a cheap rate you deal with poor quality vendor. And it is not accident that Infosys closed in the green today despite the carnage on Dalal Street.

I think there is native intelligence that the street always had of the difference of the quality of the company between Infosys, Wipro, TCS and some of the second rung companies. So I think that market wisdom played out.

So there is an impact on Satyam stock, on the market for a quarter or so but one thing I am clear about is that it will not have a long run permanent impact on Indian technology. We are a world class source there are some great companies and people will realize that they want to deal with world-class players in India they will have to pay their price and they will pay that price because India is still remains a very alluring destination. So all this talk about software going out of India, I think I don’t buy that.

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