Dec. 24 (Bloomberg) -- Wipro Ltd., the second-worst technology stock on India's benchmark Sensitive Index this year, gained the most since May 2004 on a report it may bid for Europe's largest computer services company Cap Gemini SA.
Wipro gained 8.9 percent to 535.3 rupees at the close of trading on the Bombay Stock Exchange today. Wipro and rival Infosys Technologies Ltd. were also helped by news that U.S. consumer spending increased last month, easing worries about a slowdown in the computer services providers' biggest market.
Indian software companies are seeking acquisitions overseas to enter new markets and diversify away from the U.S. market.
Wipro, which has spent more money on acquisitions abroad than any other Indian computer services company, completed buying Infocrossing Inc. for $600 million in September, which added $6.4 million in second-quarter revenue.
``Strategically it is a sound buy, it is a question of how well we execute,'' Sudip Nandy, Wipro's next head of the telecommunications business unit, said in an interview Dec. 21, referring to Infocrossing. ``It has opened up a whole market.''
Nandy, who will become president of the unit Jan. 18, is a senior vice president and chief strategy officer for Wipro.
The stock-market gains may be short-lived as ``bad things are still to come,'' said Religare Securities Ltd. analyst Harshad Deshpande.
`Hold'
Deshpande rates Wipro a ``hold'' because ``we haven't yet taken a call on how big the impact of a U.S. recession will be.'' Comments from Wipro and Infosys in April at the start of the next fiscal year will reveal their outlook, he said.
Indian software companies had been ``touching their bottom valuation, what it had been in 2003, so this could be a kind of short-term bounce back,'' Deshpande said.
Infosys, India's second-biggest software exporter, rose 6.6 percent to 1,810.90, while larger rival Tata Consultancy Services Ltd., added 6.1 percent, to 1,108.70. The two stocks had their biggest gain in more than 17 months. Indian software companies get more than half their sales from the U.S.
Wipro for its part may not embark on a transaction that would see the company be forced to take on debt, Deshpande said.
Cap Gemini is ``almost four times the size of the Indian player,'' Deshpande said.
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