Tech Thursday and IIP insights

Performance stands out like a ton of diamonds. Non performance can always be explained away. - HS Geneen. The stage is all set to view the results of the performance of technology bellwethers – TCS and Infosys. It’s a quarterly affair, sure. But these remain the triggers for near term direction on the sectors and companies. Markets will also have to contend with IIP data for May. Infosys will be among the first off the blocks. It is likely to scale back its dollar revenue guidance for FY13 while upgrading rupee EPS due to currency fluctuations. TCS is expected to announce its numbers after the close of trade. TCS’ margins could drop by 50-60 bps due to salary hikes. On the other hand, IIP has been quite volatile, raising doubts about its accuracy. However, it still is an important indicator for the markets. May IIP is expected at 1.7% while WPI inflation, which is due on July 16, is estimated at ~7.5%. The opening will be slightly lower given the negative global cues. Asian indices are down, tracking losses on Wall Street, after FOMC minutes showed lack of consensus on QE3. Wall Street has also been jittery about the impact of economic slowdown on corporate earnings. At the same time, people are skeptical of ongoing efforts to address the eurozone debt crisis. Indian markets have risen on hope of positive policy action after the Prime Minister took additional charge as the Finance Minister, leaving scope for disappointment if the Centre is unable to deliver on pending reforms. Spanish Prime Minister Mariano Rajoy has outlined 65 billion euros in additional budget cuts necessary for meeting new deficit reduction targets in return for bailout for its ailing banks. Spain's market out-performed the rest of Europe on Wednesday. Markets in Germany, France and UK were more or less subdued. Meanwhile, South Korea’s central bank has surprisingly cut its key rate by 25 bps to support its domestic economy amid mounting worries over slowdown in the developed world and deceleration in China. Brazil's central bank too has cut its benchmark rate by 50 bps to a new low of 8%. FII flows have been positive lately but may not sustain for long unless there is encouraging policy action from the Government's side in the next few days. DIIs have been selling Indian equities. Rainfall seems to have improved but apprehensions persist over further progress of monsoon. A weaker-than-anticipated monsoon will push food prices higher. The RBI will take this into account when it takes up a review of its monetary policy on July 31. Main Results Today: Bilcare, Geojit BNP, Gruh Finance, Infosys and TCS. Trend in FII flows: The FIIs were net buyers of Rs 844.2mn in the cash segment on Wednesday while the domestic institutional investors (DIIs) were net sellers of Rs 3.56bn, as per the provisional figures released by the NSE. The foreign funds were net buyers of Rs 6.35bn in the cash segment on Tuesday while the Mutual Funds were net sellers at Rs 1.24bn, according to the SEBI figures. Global Data Watch today: Bank of Japan Interest Rate Decision, Reserve Bank of Australia (RBA) Deputy Governor Lowe Speaks, Australia's Unemployment Rate s.a. (June), Australia's Consumer Inflation Expectation (Jul), France Consumer Price Index (EU norm) final (YoY) (Jun), Germany Wholesale Price Index (MoM) (Jun), ECB Monthly Report, UK 10-year Bond Auction, Eurozone Industrial Production (YoY) (May), Greece Unemployment Rate (MoM) (Apr), US import price index, US export price index, US weekly initial jobless claims, ECB President Draghi's Speech, US 30-Year Bond Auction, FOMC Member Williams speech, and US Monthly Budget Statement (Jun).