Tech stocks were quite inconsolable on Monday as reports emerged that more US states may restrain outsourcing to other countries in order to protect their own interests.

Software bellwether Infosys Technologies (down 2.3% to Rs 4,376), Wipro (down 1.1% to Rs 1,427), Satyam Computer (down 1.3% to Rs 219.70) and HCL Technologies (down 1.6% to Rs 166.30), were the leading lights among IT stocks to feel pressurised by the recent flush of negative developments.

In second line tech stocks, DSQ Software (down 6.8% to Rs 11.50), Trigyn Technologies (down 6% to Rs 19), Kale Consultants (down 5.6% to Rs 34), Fortune Informatics (down 4.6% to Rs 61.90), PSI Data Systems (down 4% to Rs 66.80), Aftek Infosystems (down 3% to Rs 189.50), Hexaware Technologies (down 3.3% to Rs 133.25), Hinduja TMT (down 3.2% to Rs 207), e-Serve International (down 3% to Rs 509), Polaris Software (down 2.6% to Rs 147), KPIT Cummins Infotech (down 2.7% to Rs 181), NIIT (down 2.2% to Rs 136.70) and i-flex (down 1.2% to Rs 821), all dived into the red.

Dealers say press reports on Monday have said that four more US states - Missouri, Maryland, Wisconsin and Connecticut - are mulling introducing a blocking of offshore state government work to India due to mounting job losses in the country. Earlier, the New Jersey senate introduced a bill aimed at blocking offshore work of the state government to India with a view to protect local employment there.

However, Nasscom is said to have taken up the issue and the association has reportedly hired a US based public relations agency to educate the public and legislators about the benefit of outsourcing.

US corporates are increasingly seeking outsourcing with a view to cut costs. Indian software companies with a low-cost advantage and their high quality of service have become favourites with US companies for outsourcing. Indian IT companies are expected to get major outsourcing contracts from US corporates in the coming months.

Market men further say fears that a US-Iraq war will break out are also proving a damper for IT scrips. US weapons inspectors will submit their second report to the UN on 14 February 2003 and it is being reckoned that war is unavoidable.

IT analysts say war will create uncertainty in the flow of orders as there will be a delay in decision-making from clients. The impact of war will depend on its duration. However, the impact will be for the short term: the order flow will only stop at the onset of the war and, thereafter, everything will be normal, it is reckoned.

On the brighter side, if the war does take place, the rupee'sw appreciation will halt, as the government will start buying dollars to purchase crude oil. But analysts says the depreciation of the Indian currency will not benefit software companies if the order flow also slows down.