Markets Up, TCS Results Improve Sentiments

The Indian markets opened on a positive note on the back of strong Q1 numbers reported by TCS and better-than-expected Chinese GDP numbers, which grew by 7.6% for the second quarter of 2012. Yesterday, TCS surprised investors by reporting strong results for the Jun quarter. The company also provided better guidance than that of Infosys, which had sounded pessimistic about the current global environment. The Sensex and Nifty are up by 0.43% and 0.40% respectively.

However, we believe that this rally may be short-lived, as Moody's has downgraded Italy’s credit rating to around junk status. This has come just ahead of the bond auction, and threatens to highlight fears over the ongoing debt crisis. Moreover, the Chinese GDP for the Q2 (Apr-Jun 2012) grew by 7.6% at the slowest pace since the Jan-Mar 2009 quarter, though it was still in line with the market's expectations of 7.6%. This is the sixth consecutive quarter of slower growth, following the annual growth of 8.1% in the first three months of 2012.

The Asian markets opened trades on a flat, positive note on expectations of better GDP numbers for the Jun 2012 quarter. With the release of the GDP numbers, the markets rose briefly, but almost immediately they turned choppy again. While the 7.6% growth has come in line with the market expectations, it has underscored the problems in the company's export-dependent growth model.

Of the Sensex shares, HDFC Bank is up by 1.41%. The company will announce its Jun 2012 quarter results today. TCS is up by 2.08% at Rs 1261 after the company reported strong results for the elapsed quarter. Other gainers such as Cipla, Hero MotoCorp, Hindalco and Wipro are up by nearly 1% each. Among the losers pack, Infosys and Maruti Suzuki are trading down by 0.70% and 0.43% respectively.

In individual stocks, Aurobindo Pharma and Divi's Labs declined 0.6%-0.9% as the Andhra Pradesh Pollution Control Board has asked 12 pharma units to shut down their operations.

The market breadth, which indicates the overall health of the market, is positive at the moment. On the BSE, 1394 shares have risen and 616 shares have declined. 87 shares are unchanged.

We expect the markets to lose their early gains later on the back of the weak global markets.