Infosys Technologies, Wipro, Satyam Computer and HCL Technologies and many other IT stocks have outperformed the benchmark Bombay Stock Exchange Sensex by as much as 300-600 per cent during the first seven trading days of the current month.

Infosys Technologies, for example, has appreciated 16 per cent during the first seven trading days. However, the Sensex has risen by only 2.32 per cent during the same period.

The Satyam Computer scrip gained 10.2 per cent, Wipro rose 16.9 per cent, while HCL Technologies moved up by 14.6 per cent during the same period.

These stocks have appreciated by over 45 per cent in the last three months, compared to the 36 per cent rise of the Sensex.

The rise in frontline IT stock was almost three times higher than in the Nasdaq Composite index over the same period. The Nasdaq rose 16 per cent in the last three months.

Nevertheless, the correction in IT stocks has already set in during the last three trading days. The BSE IT index has declined by 6.60 per cent, while the BSE Sensex declined by 2.7 per cent.

The frontline stocks recorded a steep 7.50-9.50 per cent fall. Infosys has declined by 7.50 per cent, HCL Tech and Satyam have declined by 9.50 per cent each, while Wipro shed 8.30 per cent.

According to SSKI analysts, the strong rally in tech counters during the past three months was based on growth expectations.

It was expected that stronger growth for the US economy in the second half of 2003 extending into 2004, would to lead to increased tech spending.

Also, there was a positive commentary by technology and IT service companies in the US regarding the near-term outlook.

Besides, there are some technical factors at work. Such as the very strong inflows into Indian equities, and the Indian IT services sector's catch-up with the Nasdaq and the Sensex, after its under performance since Infosys' shockingly low guidance in April 2003.

The sharpness of the upturn in the Indian IT services sector has caught analysts by surprise. Though the fundamental outlook seems to have improved for the near term, the market is factoring in a significant improvement in 2004-05, leaving no margin of safety.

The consensus is that the US economy would show strong growth in the second half of the current year.

However, confidence in the 2004 outlook is less robust, as some of the near-term factors may well be missing then. So, the tech-spending outlook for 2004 is not completely clear at this point.