Saturday, April 16, 2011

Sensex slides 310 pts on weak infy guidance, inflation nos

Indian equity benchmarks shattered after the IT bellwether Infosys' disappointing earnings per share guidance for FY12 and spike up in inflation numbers on Friday. Unwinding pressure and build up of shorts halted the Wednesday's surprised rally by erasing more than 75% of gains on the Nifty in today's trade.

The 50-share NSE Nifty shed more than 100 points during the day to hit a day's low of 5806, before closing at 5,824.55, down 86.95 points or 1.47%, dragged down by 42 stocks out of 50.

Mitesh Thacker of feels that the market might be in the range of 5750-5910 for next few days.

"Clearly 5900 is the level to watch for an upside breakout. Though with CNX IT and lot of IT heavy weights chart has been damaged which might take a bit more of consolidation before the markets eventually cross those levels. On the downside - 5750-5760 is a very good level, the 200 DMA is at about 5730. So there are early signs of a range being developing over here. For the next few days we might be in this range."

Fourth quarter numbers and guidance for FY12 from the India's second largest IT services exporter Infosys dampened the mood on the Dalal Street today. The stock tumbled nearly 10%, to settle below the Rs 3,000 a share, which shed more than Rs 18,500 crore in market cap

Infosys reported a net profit of Rs 1,818 crore up 17.1% year-on-year, while revenue was up 22% on year to Rs 7,250 crore in the fourth quarter. Analysts had expected the company’s net profit at Rs 1,856 crore on revenue of Rs 7,447 crore for the fourth quarter, according to a CNBC-TV18 poll.

Infosys has guided for an earnings per share of Rs 126.05-128.21 for 2011-12, while many analysts had projected an EPS of close to Rs 145-150.

Analysts say they are likely to lower their 2011-12 (April-March) earnings expectations for Infosys Technologies since the guidance is way below what they were expecting.

"A downgrade is most likely to happen. An EPS of Rs 150 is out of the way now. We will be surprised if Infosys even manages Rs 140 a share," said Shindadkar of ICICI Securities.

"Infosys results, guidance will kind of come and go but it will not have as damaging effect on the IT sector and on the markets as a whole as it use to have earlier," Dipan Mehta, member BSE, NSE told CNBC-TV18.

Country's largest IT services exporter TCS slipped just 1.55%, much lesser as compared to Infosys' fall. Experts believe TCS will report better numbers than Infosys. Wipro plunged 4.8% and HCL Tech was down 3%.

The 30-share BSE Sensex slipped 310.04 points or 1.57%, to end at 19,386.82. The broader indices were marginally in the red. For the week, benchmark indices fell 0.3%.

Inflation was the second reason that added more fuel to the fire. The wholesale price index (WPI) for the year rose to 8.98% in March as against 8.31% in February on higher fuel and manufactured product prices. The reading for January was upwardly revised to 9.35% from 8.23%.

Jonathan Cavenagh senior forex strategist for institutional forex sales-Asia at Westpac Institutional Bank, said this was a pretty strong inflation print for India—9% versus 8.36%. “RBI won't be too happy with that and more broadly inflation is proving to be quite sticky around this 8-9% level, despite what could be considered an aggressive tightening cycle since early 2010. I don't think this does INR much good as Indian equities are coming off on the back of this data. So I wouldn't be surprised to see USD/INR higher and/or INR underperform other Asian currencies."

Sonal Varma, India Economist, Nomura Financial Advisory & Securities (India) said that RBI was expected to hike rates by 25 basis points (bps) on May 3, 2011.

The Nifty April Futures ended at 5825 with addition of 4.63% in open interest on the short side. Nifty 5900 call was the most active call on back of huge call writing. However, the Nifty 5800 Put saw 12% cut in open interest indicating put writers had to cover their short positions built up on Wednesday.

Heavyweights ONGC, ICICI Bank, NTPC, HDFC and HUL were down 1-2%. DLF, Maruti, Tata Motors, Reliance Communications, SAIL, Sun Pharma, SAIL and DLF too lost 1-2.5%.

Siemens plunged 4% after the open offer. Sources told CNBC-TV18 that open offer book has received 9.93 crore shares as against book of 6.7 crore shares. LIC and UTI tendered 100% of their holdings in open offer and Siemens promoters successfully raised stake to 75% via open offer.

However, Hero Honda gained another 5.5% today after it has approved a dividend of Rs 70 per share. Bharti, ITC, Bajaj Auto, L&T, Jaiprakash Associates and Dr Reddy's Labs were top gainers, with rising 0.5-1.5%.

In midcap space, Hathway Cable, Fresenius Kabi, HMT, Redington and Himadri Chemical gained 6-11% while Kwality Dairy cracked 14%. Unichem Labs, Core Projects, Indiabulls Financial and DB Realty slipped 4-5%.

In smallcap space, Uflex, Timken, C Mahendra Exports, Gemini Comm and Balaji Telefilm rallied 10-13%. However, Prraneta Inds, Banco Products, Atlanta, Infinite Computer and Kanani Industries lost 6-11%.

About 1352 shares advanced as against 1601 shares declined on the Bombay Stock Exchange.


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