Results anxiety, global weakness plague market

Caution before Infosys Technologies flags off the earnings season Friday (13 April) and a weak trend in global markets pulled domestic bourses lower today. Asian and European shares edged lower on concerns of a further rise in US interest rates. After an initial sharp fall, the market made a good intra-day rebound by early-afternoon trade. But the recovery was short-lived and the market failed to sustain higher level.

The 30-share BSE Sensex lost 69.43 points (0.53%), at 13,113.81. It had moved 129.28 points, between a low of 13,030.87 and a high of 13,160.15.

The S&P CNX Nifty dropped 32.80 points (0.85%), to settle at 3,829.85. The Nifty April futures were at 3,797.95.

As per provisional data, FIIs were net sellers to the tune of Rs 173.58 crore today

The market-breadth was weak. Against 1,466 shares had declined on BSE, 1,090 that rose. Also, 74 stocks remained unchanged. Losers outpaced gainers by a ratio of 1.34:1. The BSE Small-Cap Index shed 28.98 points (0.43%), to settle at 6,682.53. The BSE Mid-Cap Index shed 4.66 points (0.08%), to end at 5,512.40.

Asian and European stocks fell on Thursday (12 April), dented by concern about the economic outlook for the United States and a rise in oil prices. Minutes of the US Federal Reserve's March meeting, released on Wednesday, hinted at a need for further interest rate increases in the United States to fight inflation. Key benchmark indices in Japan, Hong Kong, Singapore, and Taiwan were down between 0.1 – 1.4%. In Europe, key benchmark indices in London, Germany and France were down between 0.4 - 0.6%.

Rising US interest rates do not bode well for emerging markets, since cash in emerging markets may become a casualty as a result.

US stocks fell on Wednesday, as markets faced up to reality that the Federal Reserve may raise interest rates again to quash inflation. The Dow Jones industrial average fell 89.23 points, or 0.71%, to 12,484.62. The Standard & Poor's 500 Index slid 9.52 points, or 0.66%, to 1,438.87. The Nasdaq Composite Index lost 18.30 points, or 0.74%, to 2,459.31.

The BSE clocked a turnover of Rs 3127 crore today compared to Wednesday’s Rs 3952 crore.

Except BSE IT index and the BSE Tech Index, all other sectoral indices of BSE ended in the red. The top-loser in percentage terms was the BSE Metal Index, which had lost 208.86 (2.2%), to end at 9,122.01. BSE FMCG index shed 23.21 points (1.28%), to finish at 1,788.37. BSE’s banking sector index, the Bankex, lost 82.60 points (1.26%), to settle at 6,470.32.

The BSE IT Index gained 71.51 points (1.49%), to end at 4,879.59. The BSE Tech, which is a free-float index comprising IT, telecom and media shares rose 22.01 points (0.63%), to finish at 3,525.65.

Infosys led the gain in IT shares ahead of the announcement of Q4 March 2007, results from the IT bellwether on Friday (13 April). Infosys gained 2.3% to Rs 2040, while Satyam Computer gained 1% to Rs 446.

Infosys unveils Q4 results tomorrow. The rupee’s sharp surge in late-March 2007 - early April 2007, against the US dollar, as well as mixed reports from the US economy, have raised concerns that the FY 2008 guidance by Infosys may turn out conservative. Infosys unveils its full year guidance at the beginning of the financial year along with Q4 March results

According to analysts, an important factor IT companies must watch out for is the extent of equity dilution in the March 2007 quarter arising out of exercise of employee stock options (ESOPs). This is so in the backdrop of the Budget 2007-08 bringing ESOPs exercised on or after 1 April 2007 under fringe benefit tax. Analysts will also closely watch revenue guidance in dollar terms and expect wage hike for FY 2008 in Infosys’ FY 2008 outlook.

8 brokerages have forecast a between 3.1% to 6.9% sequential growth in Infosys’ Q4 March 2007 consolidated net profit to between Rs 1013.60 crore to Rs 1050.80 crore compared to net profit of Rs 983 crore in Q3 December 2006. They have forecast a between 4.8% to 7.2% sequential growth in revenue to between Rs 3830.60 crore to Rs 3917.30 crore compared to Rs 3655 crore in Q3 December 2006.

TCS rose 1.1% to Rs 1204. As per a report, Tata Sons is considering a $1 billion-plus overseas equity offering in Tata Consultancy Services to fund acquisitions. The offer may take place in six months and include the sale of new shares, a newspaper report said.

Oil exploration major ONGC plunged 3.4% to Rs 850. It was the top loser among 30 Sensex constituents. It will invest over Rs 6700 crore to raise oil and gas output, and set up the first large power plant, the state-run oil exploration company said on Wednesday.

Tata Steel lost 3.2% to Rs 495. As many as 22.1 lakh shares changed hands in the counter on BSE. Tata Steel said on Tuesday its board will meet on 17 April 2007, to consider proposals for raising equity funds to finance investment in a special purpose vehicle (SPV) for the acquisition of steel maker, Corus Group.

Ranbaxy shed 3% to Rs 334.45. Ranbaxy Laboratories said on Thursday, it had received approval from Canadian authorities to sell antibiotic cefprozil tablets and powder in Canada.

Auto shares drifted lower. Car major Maruti Udyog (MUL) shed 2.9% to Rs 759.05, Tata Motors lost 1.7% to Rs 709 and Hero Honda shed 1.4% to Rs 631.10. But Bajaj Auto rose nearly 3% to Rs 2345.

Selling was conspicuous in banking stocks. HDFC Bank lost 2.2% to Rs 958, State Bank of India (SBI) shed 1.3% to Rs 968.45 and ICICI Bank lost 1.1% to Rs 849. Banking credit growth decreased to 27% in 2006-07 from 29.6% growth a year earlier, as a result of stiffer monetary tightening since December 2006. The year-on-year growth in bank credit till 29 December 2006, was 30.1%.

Cellular services major, Bharti Airtel, was down 0.1% to Rs 772, off the session’s low of Rs 761.01. The company added 1.7 million new cellular customers in March 2007, taking their user base to 37.1 million.

Gujarat Ambuja Cements (GACL) shed 1.4% to Rs 106.30. GACL said on Wednesday, its March shipments fell 4.5% to 1.48 million tonnes from a year earlier.

Jet Airways gained 2.6% to Rs 625.15, after the company said it had agreed to buy Air Sahara for Rs 1450 crore. The price includes Rs 500 crore that Jet had paid to Air Sahara last year as a bank guarantee pending an acquisition, as well as Rs 400 crore that Jet will pay on or before 20 April 2007. The balance will be paid in equal, interest-free annual installments from March 2008 to 2011. The combined entity will have a market share of about 40%.

Sesa Goa lost 4.4% to Rs 1671.50, after a newspaper report said Aditya Birla group was leading the race with a bid for Mitsui's 51% stake in the company at Rs 1550 a share, 11.4% lower than Wednesday's closing price of Rs 1749.65.

IFCI rose 3.4% to Rs 38, on strong institutional interest. Volumes in the stock were a huge 1.99 crore shares on BSE.

Real estate developer Orbit Corporation settled at Rs 127.95, on BSE. The scrip today debuted at Rs 90 compared to the IPO price of Rs 110. It hit a low of Rs 90 and a high of Rs 137. As many as 1.44 crore shares changed hands in the counter on BSE.

UTV Software Communications rose 2.7% to Rs 309.75, after the company said it planned to sell a stake in a film production subsidiary and a possible listing of the unit in the Alternative Investment Market of the London Stock Exchange (LSE).

Reliance Capital dropped 2% to Rs 661.25. Reliance Capital on Wednesday announced its foray into the brokerage business through Reliance Money, which will offer ‘fixed’ flat-fee structure instead of the contemporary system, where investors pay brokerage fee for each transaction conducted in the stock market.

Lupin rose 1.5% to Rs 625.10, after the company got approval of the US Food and Drug Administration to sell cefixime, an antibiotic for children, the company said on Thursday. Commercial shipments of the product have already commenced, Lupin said.

Bharat Forge rose 0.3% to Rs 313.90. The company is reportedly foraying into manufacturing components for aerospace applications and marine engines by investing Rs 300 crore in a greenfield project at Baramati as the first step.

Hindustan Zinc dropped 3% to Rs 681.10, even as the company said on Thursday it had increased zinc prices by 8.3% (Rs 13400) a tonne to Rs 1,75,000 a tonne, with immediate effect. It also increased lead prices by 2.2% to Rs 99,100 a tonne.

The immediate trigger for the market is Q4 March 2007, results. Overall Q4 results are expected to remain strong. More important than Q4 results is what company managements say about the outlook for the current financial year (FY 2008). The Citigroup expects an overall corporate earnings growth to moderate to 15 - 16% in the current and next year, while FY 2007 (year ended 31 March 2007) could be the fifth straight year of 25 - 30% earnings growth.

Key important data due tomorrow 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 today, 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.