Currency wars & Infosys results

However beautiful the strategy, you should occasionally look at the results. - Winston Churchill.

It’s a war out there as far as the currencies are concerned. South Korea and China are sparring with each other on the sensitive subject. Singapore has taken steps to boost its currency to curb inflation. Brazil, South Korea and Thailand have all announced measures to restrain surging overseas inflows.



India too is likely to intervene as FII inflows are set to jump due to the Coal India IPO. The Indian rupee, which is the best performer in Asia this month, is likely to climb further.

The stock market is likely to open on a subdued note. Global markets remain indecisive with US stocks ending virtually flat, while banking stocks sent European benchmarks lower. Asian markets are mixed.

All eyes of course are on the Infosys results first and then inflation data. Infosys is expected to announce a strong set of numbers in what is touted as its best quarter. Raising of FY11 guidance is also on the cards.

Inflation is likely to stay static in September. Overall, the trend may remain choppy though there could be a turnaround later in the day. Technically, consolidation after a sharp upmove is considered healthy. If global cues are supportive, the Nifty could test new record high in the coming days.

Infosys is expected to post 9% QoQ growth in revenue for Q2 FY11 while net profit is projected to grow by 16% sequentially. OPM is also expected to rise smartly. These numbers are as per Indian GAAP. Infosys is also expected to up its annual dollar revenue guidance as well as EPS outlook.

The G20 summit, scheduled for next week in South Korea, could be a stormy affair. Whether the top leaders are able to resolve differences over currency matters remains to be seen. For now though, the dollar continues to be under tremendous pressure amid rising expectations of QE2 from the Fed early next month.

Fed chief Ben Bernanke is slated to speak later today at the Boston Fed’s annual conference. He might talk about how the Fed may respond to the current low-growth, low-inflation environment.

Most experts believe that the US central bank is going to launch a second round of asset purchases after its policy meeting that is due to conclude on Nov. 3. The question is what will a second round of quantitative easing look like.

Weakness in the greenback is driving the rally across risky assets such as stocks and commodities. High-yielding currencies are also spurting, forcing some policymakers to take steps to rein in relentless foreign inflows.

Results Today: DCB, Heidelberg Cement, Karnataka Bank, Manappuram General Finance, Nu Tek India and Venus Remedies.

The FIIs were net buyers of Rs10bn in the cash segment on Thursday (provisionally), according to the NSE web site. Local funds were net sellers of Rs6.94bn. In the F&O segment, the foreign funds were net buyers at Rs4bn. The FIIs were net buyers of Rs31bn in the cash segment on Wednesday, as per the SEBI web site. Mutual Funds were net sellers at Rs3.52bn on the same day.