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Media Reports
WAS the sharp increase in the Tata Infotech’s stock price in the last week of May only on account of impressive results posted by the software company, or did someone capitalise on inside information about the likely results and make some quick money? If one considers the price and volumes pattern of the scrip, there is more than enough reason to suspect that some persons possessed price-sensitive information about the company’s excellent working results a week before its presentation and traded on this knowledge. The ramp-up in the Tata Infotech share price was further aided by rumours of the company’s merger with the country’s biggest IT services company, Tata Consultancy Services. These were formally denied by the group on May 29. The Tata Infotech scrip shot up 80 per cent from Rs 131 to Rs 238 in a matter of six trading days during May 22 to 29. However, it dropped sharply from intra-day high of Rs 238 to close at Rs 189 on May 29 as the Tata group denied rumours of the merger with TCS. During the period, most software stocks like Infosys, Wipro and Satyam witnessed sluggish trends, further raising the suspicion that players took positions on the basis of price-sensitive information. Also, during the period (May 24 to 29), the scrip witnessed combined volumes of over 30,000 to 50,000 shares on the Bombay and National stock exchanges — six to eight times higher over daily averages of 4,000 to 6,000 shares. Tata Infotech pleasantly surprised investors by announcing a 118 per cent increase in its net profit to Rs Rs 26.54 crore (Rs 12.20 crore) for 2000-01. The company’s revenue grew by just 21 per cent to Rs 524 crore (Rs 422 crore), indicating a significant improvement in its profit margins. After the announcement of the company’s results on June 6, the scrip cooled off and it is now trading around Rs 175. The company’ announcement of results failed to bring cheer to the market as it was already discounted in advance.
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