Disappointing Infosys guidance drag benchmarks lower

Distressed markets clobbered out of shape in Friday’s trade with benchmarks ending the session with a cut of a percentage point, weighed down majorly by technology stocks after disappointing performance reported by IT bellwether Infosys. The combination of domestic as well as global factors led to the brutal butchery across the board and local bourses snapped the session below their crucial 5,550 (Nifty) and 18,250 (Sensex) levels. The IT major also remained top loser and pummeled nearly 22% due to disappointing fourth quarter earnings and lower growth guidance for FY14.

The company, on consolidated basis, reported a rise of 3.37% in its net profit at Rs 2,394 crore in quarter under review as compared to Rs 2,316 crore in same period previous year. Total income of the company increased 17.09% to Rs 11,128 crore as against Rs 9,504 crore in a year ago period. Meanwhile, the company in its FY14 guidance has said that consolidated revenues are expected to grow between 6-10%, much below than Nasscom’s 12-14% industry growth expectations for the current fiscal.

Bloodbath continued till the end as upset investors ignored the decent February index of industrial production (IIP) data and are eagerly waiting for inflation data (which will decide the RBI’s move in its quarterly monetary policy review on May 3) that is scheduled for April 15. India’s IIP grew by 0.6% at 176.2 for the month of February 2013 although lower than growth of 2.4%, higher than the street expectation of a negative figure. The cumulative growth for the period April-February 2012-13 over the corresponding period of the previous year stood at 0.9%. However, Mining and electricity sector, contracted by 8.1% and 3.2% respectively. Meanwhile, India’s annual consumer price inflation slowed to 10.39% in March from the previous month.

Sluggish global cues too dampened the sentiments as European markets traded choppy in the early trade ahead of a meeting of European Union finance ministers in Dublin and an informal Ecofin meeting, while the euro dropped against the dollar. Asian counters too shut shop mostly in the red as signs of tensions in the Korean peninsula dented the investors’ sentiments.

Back home, the software and technology counters suffered brutal assault in the session amid expectations that the upcoming results season, which got kicked off by technology giant Infosys’ gloomy guidance, may not bring the much-needed cheer to the IT sector amid uncertainty in the business environment for Indian outsourcing companies. Additionally, telecom stocks, namely Bharti Airtel and Idea Cellular, ended lower for second consecutive session after Supreme Court restricted Bharti Airtel, Idea Cellular and Vodafone from enrolling new subscribers in the circles where it does not own operating license. Bucking the trend, sugar stocks remained on the buyers’ radar after sugar companies revised the ethanol prices after months of deliberation.

The NSE’s 50-share broadly followed index Nifty declined by about seventy points to end below the psychological 5,550 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by about three hundred points to end below its crucial 18,250 mark. Moreover, broader markets too struggled during the trade and snapped the session with a cut of about half a percent.

The market breadth remained in favor of declines as there were 1,042 shares on the gaining side against 1,261 shares on the losing side while 141 shares remain unchanged.

Finally, the BSE Sensex shaved off 299.64 points or 1.62% to settle at 18,242.56, while the CNX Nifty plunged by 65.45 points or 1.17% to end at 5,528.55.

The BSE Sensex touched a high and a low of 18,337.91 and 18,186.10, respectively. The BSE Mid cap index down by 0.14% and Small cap index was down by 0.39%.

The top gainers on the Sensex were, ITC up by 2.75%, SBI up by 1.98%, Hindalco up by 1.61%, Hindustan Unilever up by 1.49% and Bajaj Auto up by 1.38%, while Infosys down by 21.33%, Wipro down by 4.72%, Coal India down by 1.78%, TCS down 1.63% and L&T down by 1.31% were the top losers on the index.

The top gainers on the BSE Sectoral space were FMCG up 1.95%, Power up 1.02%, Bankex up 0.96%, Oil & Gas up 0.64% and PSU up 0.47%, while IT down 11.09%, TECk down 8.87%, Capital Goods down 0.69%, Consumer Durables down 0.61% and Realty down 0.48% were the top losers on the sectoral space.

Meanwhile, in a move to wean away investors from gold as a hedge against inflation, the Reserve Bank of India (RBI) is planning to launch inflation-indexed bonds (IIB) within a month, to encourage individuals to invest more in such instruments than in gold. Bonds, being a part of the government borrowing programme, are likely to be for a 7-15 years term.

While addressing an event, the RBI Deputy Governor H R Khan said, ‘right now the plan is that it will be issued like any other government security. What we are proposing is that non-competitive portion (retail portion), we have higher percentage of bidding, it could be 10%, it could be 15%, or 20%. So, it will be earmarked for the small fellows, trusts or individual, those who have gilt accounts.’

The finance ministry is in discussions with the central bank to finalize the structure and tenor of the bonds, which will have their own guidelines and features. Further, it will be linked to Wholesale Price Index (WPI) and will be indexed every six months.

These instruments could be either in the form of inflation-indexed bonds or inflation indexed-national security certificates and retail investors can get these without participating in the auction at the cut-off price. Earlier, Finance Minister, in his Budget speech, had proposed to introduce these instruments to protect savings from inflation, especially the savings of the poor and middle classes. 

The CNX Nifty touched a high and a low of 5,544.50 and 5,494.90 respectively. 

The top gainers on the Nifty were JP Associates up by 4.67%, Ambuja Cement up 3.54%, ITC up 2.51%, BPCL up 2.38% and Lupin up by 2.17%.

On the flip side, the top losers of the index were, Infosys down by 22.07%, Coal India down by 1.83%, HCL Tech down by 1.65%, TCS down by 1.62% and Maruti down by 1.61%.

Most of the European markets were trading in red, France’s CAC 40 down by 0.71%, the United Kingdom’s FTSE 100 down by 0.43% and Germany’s DAX down by 1.22%.

Asian markets ended mostly lower on the last day of week, as investors choose to take profits following recent gains. Seoul markets went home with red mark over the tensions in the Korean peninsula and expectations of weak earnings by South Korean firms. The Japanese market closed lower after edging up marginally in early trades, as yen recovered against dollar.