Infosys guidance to decide the course

Infosys' guidance for FY 2008 (year ending 31 March 2008) is likely to offer directions to the bourses today. The IT bellwether has a substantial 11.7% weightage in the Sensex. There is a possibility of traders shifting to Old Economy shares if the IT bellwether comes out with a muted guidance. Stock-specific buying is expected to continue amid corporate earnings reporting season which has just begun.

There have been concerns of a muted guidance from Infosys due to a surge in the rupee against the US dollar during late-March 2007 - early-April 2007, and due to mixed reports from the US economy.

Kotak Securities expects Infosys to give an EPS growth guidance of 20 - 22% range for FY 2008. It expects the EPS guidance to be constrained by equity dilution and the rupee’s surge. It expects a revenue guidance of 24 - 26% in rupee terms and 28 - 30% in dollar terms. According to Merrill Lynch, Infosys’ EPS growth guidance could be conservative, in the early 20s. It, however, reckons that the company can actually achieve a 25% EPS growth, given the strong offshoring trend.

Regarding Q4 results of the IT bellwether, eight brokerages have forecast 3.1 - 6.9% sequential growth in Q4 March 2007 consolidated net profi, between Rs 1013.60 crore and Rs 1050.80 crore compared to a net profit of Rs 983 crore in Q3 December 2006. They have forecast 4.8 - 7.2% sequential growth in revenue, between Rs 3830.60 crore and Rs 3917.30 crore compared to Rs 3655 crore in Q3 December 2006.

The key data due today is that on inflation. The wholesale price inflation rate is expected at 5.81% for the 12 months to 31 March 2007, falling from an annual rise of 6.39% a week earlier. The annual rate hit 6.73% on 3 February 2007, its highest in more than two years, but has moderated after the central bank tightened policy and the government cut duties on a range of items to rein in prices.

As per data released on Thursday (12 April), industrial production rose 11% in February 2007 from a year earlier, slightly lower than upwardly revised annual growth of 11.4% in January 2007. Manufacturing production, which represents more than 75% of industrial output, rose 12.3% in February from a year earlier, compared with a revised 12.1% annual growth in January.

Asian markets were mixed on Friday. Key benchmark indices in China, Hong Kong and Japan were up between 0.06 - 0.14%. Key benchmark indices in Singapore, South Korea and Taiwan were down between 0.1 - 0.4%.

US stocks rose on Friday, after biotechnology company, MedImmune Inc.'s, announcement that it was seeking a buyer, breeding speculation of more deals in the sector. The Nasdaq Composite Index rose 21.01 points, or 0.85%, to close at 2,480.32, with biotechnology shares rising strongly. The Dow Jones Industrial closed up 68.34 points or 0.55%, at 12,552.96, and the S&P 500 index finished up 8.93 points or 0.62%, at 1,447.80.