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Infosys dictates terms - Views on News from Equitymaster
 
 
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  • Jul 12, 2003

    Infosys dictates terms

    It was an important week for the markets, as software majors Mphasis and more importantly Infosys declared their quarterly results. Infosys declared results, which not only beat its own guidance (as usual), but also bettered market expectations. Any disappointment on the results front by the software major, could have marred investor sentiments, which might have had resulted in the indices taking a U-turn. However, investors heaved a sigh of relief when the tech bellwether declared its results, which led to a flurry of buying activity in the software sector. For the markets as a whole, it was a good week with the BSE Sensex gaining 1.5% while the Nifty closed higher by 2%.

    The markets remained more or less subdued throughout the week with no significant movement on either side. Indices remained rangebound over the week barring the handsome run seen on the bourses after Infosys announced its results. Uncertainty over the software major’s result seemed to have restricted the market in a narrow range for the first three trading days of the week. However, the Sensex gained 1.6% on Thursday, sentiments buoyed on account of good numbers from Infosys. Though, one thing worth noting here is the fact that on all the five trading days, the indices opened on a strong footing but profit booking was seen at higher levels. This is in contrast to the movement of the indices in the last couple of months, wherein strong opening gains were supported by further follow up buying.

    Top 5 gainers over the week
    COMPANY Price on July 4 (Rs) Price on July 11 (Rs) % CHANGE 52-WEEK H/L (Rs)
    BSE-SENSEX 3,622 3,676 1.5% 3,715 / 2,828
    S&P CNX NIFTY 1,138 1,162 2.0% 1,171 / 920
    TRIGYN TECHNOLOGIES 18 23 23.3% 45 / 10
    UTI BANK LTD. 54 65 21.6% 70 / 33
    IDBI 36 43 19.7% 43 / 15
    MASTEK 283 326 15.1% 615 / 249
    HUGHES SOFTWARE 220 253 14.6% 264 / 125

    The most important event for the week was the results announced by Infosys, India’s second largest software company. It announced a 6% sequential growth in its topline for 1QFY04 thus surpassing its own projections and market expectations once again. Also, the bottomline increased 7% sequentially for the quarter. On a YoY basis, the company’s revenues are up 41%, while the profits registered a growth of 28%. The growth on the profits front has been significant considering that the company had given a guidance stating a 1% sequential fall in net profits for the June quarter. The strong growth in topline was primarily a factor of the 9.6% rise in volumes. Another heartening fact for investors was the curtailment of a fall in billing rates from a severe 5.1% in 4QFY03 to a mere 1.9% in 1QFY04. However, the company has reiterated its stand on concentrating on volumes in the wake of pressure of billing rates likely to continue.

    Detailed results: Infy beats expectations , Infosys: Growth in perspective

    Top 5 losers over the week
    COMPANY Price on July 4 (Rs) Price on July 11 (Rs) % CHANGE 52-WEEK H/L (Rs)
    BOMBAY DYEING 77 68 -11.6% 80 / 41
    BATA INDIA 44 40 -10.3% 48 / 26
    NOCIL 12 11 -10.0% 14 / 5
    INDO RAMA SYN. 39 36 -8.2% 41 / 23
    VOLTAS 82 76 -7.4% 87 / 44

    Another big event for the week was the listing of India’s largest passenger car manufacturer, Maruti Udyog’s on the bourses. The IPO was made through the book-building route at a floor price of Rs 115. It had met with huge demand (9 times oversubscribed) from investors, retail and institutional, who, in order to get a share of the allotment pie, bid at prices higher than the floor price, finally leading to a higher allotment price at Rs 125. The story, however, did not end there! On the first day of listing (Wednesday), the Maruti stock closed at a 31% premium to the allotment price and has continued to gain ground since then. The stock closed on Friday at Rs 173. However, at this juncture, we must caution investors that the valuations of the stock do not seem to justify the growth prospects of the company going forward. It must be noted that the company has been consistently losing market share to newer market entrants like Tata and Hyundai.

    Going forward, since we are in the earnings season, sentiments in the month of July will primarily be governed by the results being announced by industry stalwarts. Some key results due to be announced next week include HDFC Bank, Mastek, HDFC, TVS Motors and software major, Wipro. Volatility could be the flavour for this week. Investors are advised not to make decisions in a haste and think rationally.

     

     

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