Friday, 12 October 2012

Sensex ends 130 pts down on poor Infy Q2; awaits inflation

Sensex ends 130 pts down on poor Infy Q2; awaits inflation
Clean Media Correspondent

Mumbai, Oct 12 (CMC)  The BSE Sensex fell 130 points on Friday following bleak outlook presented by Infosys for its full year numbers and on less hopes of rate cut by the Reserve Bank of India (RBI). The index closed at 18,675.18.

Software bellwether Infosys' net profit grew by 3.5 percent to Rs 2369 crore, which was in-line with analysts’ forecast. But the cut in EPS and dollar revenues guidance for FY13 and bad performance at operating level dampened the mood. The stock plummeted 5.36 percent.

Infosys is now walking an extremely tight rope in which it will have to clock growth rates in excess of 3.5% in both the subsequent quarters which are supposed to be seasonally weak in nature, says Rajni Ghildiyal, Senior Analyst of Asit C. Mehta Investments Interrmediates Ltd.

"This makes us believe that Infosys will find it extremely difficult to achieve 5% revenue growth for FY13E. That in turn could be detrimental for earning estimates and valuations," she said.

Infosys said that its CFO V Balakrishnan would give up his position from October 31, 2012 and will now look after BPO operations, Finacle and India operations. This is a also cause of concern as its does not give out a good picture of the company which is not doing well since past 3 quarters, says Ankita Somani (Research Analyst-IT & Telecom) of Angel Broking

Meanwhile, the 50-share NSE Nifty declined 32 points to 5,676.05, weighted down by ICICI Bank, HDFC, Bharti, Tata Motors and SBI.

On the economic front, industrial output, which was slightly better-than- expectations today, will not have any impact on RBI policy, say experts.

The Index of Industrial Production (IIP) grew at 2.7 percent in August against a dismal -0.2 percent in July.

Inflation, which is scheduled for Monday, will be closely watched by investors ahead of RBI policy.

Manish Wadhawan of HSBC Bank believes the IIP number is more on expected lines, but as far as its impact on the monetary policy is concerned, it is a neutral number. Therefore, it will not impact the RBI's rate cut decision on October 30.

The September Consumer Price Index (CPI) number disappointed as combined inflation rose 9.73% year-on-year, up 10.03% month-on-month. According to him, the inflation numbers have a greater impact on monetary policy and looking at the high CPI numbers, it is difficult to say what the RBI might do. If the inflation figure released on Monday is around 7.75%, there may be a 50-50 chance of a rate cut, he says.