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Post Infosys

Apr 12, 2001

Infosys, the TMT catalyst, which could have driven the markets up, disappointed with profits warnings. The season for earnings reports has just started and more shocks are not ruled out. Agreed, Infosys' profit warnings stunned the markets, but the company was transparent enough to come out with the clear indications. Also, considering the fact that companies worldwide are facing problems due to economic downturn, Indian software companies were bound get impacted, sooner or later. However, what is interesting is that the company added 37 new clients during the quarter and is quickly shifting onsite business to offshore. Nevertheless, the fact remains that the markets will discount FY02 earnings, which are expected in the range of 30% and further battering of the stock looks certain.

Foreign funds, which were buying aggressively till date (Rs 85.4 bn), have also pressed the sell button. They were net sellers to the tune of Rs 113 m in the first two days of the week. Mutual funds meanwhile continued their selling spree (outflow of Rs 365 million during the same period).

Today being the last trading day of the settlement on the BSE (Friday is holiday) operators would not like to build up fresh positions. Also in the absence of any positive news (specially from TMT sector), the weak undertone in the markets is expected to continue. Also, two other tech majors Hughes Software and Mastek are expected to declare their results today. Lower than expected results from these tech majors would depress the sentiment further in the coming weeks.

It was assumed by the investors that most of the negative news was already factored in the markets. But the result season this time seems to be scary particularly for the TMT sector.

The other half of the market, i.e. the old economy has also not yet any concrete signals. The only real positive at the moment could come from the speeding up of the disinvestment programme. But given the resistance faced during Balco's disinvestment, this option is not a very bankable one.

Time to wait and watch!


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