Markets Open Lower; Infosys Down 7%

The Indian markets today have opened lower due to a downfall in the IT index. Big ticket results announcements have kick-started today, with the Q2FY13 results announcement of Infosys and HDFC Bank. Moreover, the IIP numbers are to be announced around noon, and the street is expecting a marginal growth of 1% in August 2012 over July 2012.

Infosys’ poor results were coupled with a downward revision in their yearly guidance. This has come in as expected, and the company has cut its Earnings Per Share (EPS) guidance from Rs 166.46 to Rs 160.61. This move has been a result of the appreciation seen lately in the rupee. Moreover, even the constant currency dollar revenues guidance was reduced. This has resulted in the tech giant’s share declining by more than 7%.

On the IIP front, the growth in July 2012 was seen at 0.1% and from the period April-July, it was seen at -0.1%. August is expected to be better, though not due to real growth but on account of a lower base seen in August 2011, which was a result of the hit taken by many sub-categories. However, the markets seem to be taking a cautious approach ahead of the data announcement.

The Sensex is currently trading lower by 47.36 points or 0.25% at 18757.39 and Nifty is down 10.2 points or 0.18% at 5697.85.

The Asian markets opened higher today but their gains are seeing cuts. The Japanese markets are being weighed down by negative results of companies like Softbank Corp and Fast Retailing Co. China too seems pessimistic over the results that are to be announced soon. Other key data to be released includes Q3 economic growth, September inflation and industrial output. This data would to reflect the economic health of the country more clearly.

On the domestic front, there is definite selling in the Sensex, but midcaps and smallcaps seem quite strong with an uptick of 0.74% and 0.68% respectively. Of the 13 indices, only 2 are trading negative at the moment. Teck is lower by 2.90% and IT is down by a hefty 3.88%. These sectors seem to be reversing the effect of the gains in all the other sectoral indices.

Though there seems to be internal strength in the markets overall, it is being pushed downwards due to Infosys. We expect the markets to remain negative till the release of the IIP data. This would bring about more clarity in terms of market direction, giving the markets a more definite path to move towards.