Indian IT's Perfect Storm ; An appreciating rupee, rising wage costs, and potential withdrawal of tax breaks (not to mention a slowdown in the US) are coming together to create the worst ever conditions for Indian IT. What is the industry to do?

Business Today, October, 2007 by E. Kumar Sharma; Nitya Varadarjan; T.V. Mahalingam; Rishi Joshi additional reporting by Rahul Sachitanand

For an industry that was until recently the bellwether on Dalal Street, the recent slight from investors must seem humiliating. Even as the Bombay Stock Exchange index, Sensex, surged from 16,000 to 17,000 in a matter of just six trading sessions (the fastest 1,000- point gain, since the index hit 10,000 in February 2006), leading the rally were Reliance Industries, Bharti Airtel, L&T and ICICI Bank. Earlier, when the Sensex topped 16k on September 19, it was once again Reliance Industries, HDFC, and ICICI Bank (which together account for about a quarter of Sensex by weight) that led the surge.

Sure, the IT stocks--particularly, TCS, Infosys and Wipro-- gained too, but less than 2 per cent compared to 6 and 8 per cent gains of Reliance and HDFC, respectively, on the day the...

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