Numbers game

Apr 15, 2013, 05:06 IST | Numbers game

Keeping an eye on Infosys which is growing below the industry average

Nifty closed down around 0.4 per cent last week with the IT sector as the major loser, which closed down around 10 per cent. The Banking Nifty closed up around 3 per cent and the auto and realty sector were up around 2 per cent. Technology major Infosys came out with its quarterly numbers for the fourth quarter ended March 31 2013, which showed a 3.3 per cent rise in the consolidated net profit to Rs 2,394 crore. The revenues for the quarter under review rose 18.09 per cent to Rs 10,454 crore. The company also gave a revenue growth of 6 to 10 per cent in rupee terms for the fiscal year 2014, which stood well below the estimates of 10 per cent to 15 per cent revenue growth. Also, the absence of an outlook for earnings per share from the company shows uncertainty. This is also the second year in a row that Infosys will grow below the industry average.

Last week, Asian Development Bank slashed India’s growth rate for the fiscal year 2013 - 14 to 6 per cent from an earlier estimate of 6.5 per cent. According to ADB, boosting investment may be a critical factor for a higher growth and some of the recent steps taken by the government may help address the problem. The Bank is estimating a growth forecast of 6 per cent on the basis of a normal monsoon, improvement in industrial growth. The bank also pegged inflation at 7.2 per cent in 2013-14 and 6.8 per cent in 2014-15.

The retail inflation for March stood at 10.38 per cent against 10.91 per cent in February as the prices of vegetables and protein based items eased. In urban areas, inflation data stood at 10.38 per cent for March as compared to 10.84 per cent in the previous month. In rural areas, retail inflation fell to 10.33 per cent from a level of 11.01 per cent in February.

On Friday, the industrial output data for February came out which slipped to 0.6 per cent compared to 4.3 per cent in the same month last year and against 2.4 per cent in January 2013. The reasons cited behind that were the contraction in infrastructure industry output and low demand. However the data remained above the forecast. Due to the slowing economy, high borrowing cost and rising fuel prices India's car sales dropped for the first time in a decade. For the year ended March 31, passenger car sales fell 6.7 per cent to 1.9 million units. The last time the country's annual car sales fell was on March 31, 2003, down 2.1 per cent. But Society of Automobile Manufacturers (SIAM) predicted car sales to grow 3 to 5 per cent in the current fiscal year on the back of easing interest rates.

On the global front, US markets were higher on better than expected jobless claims. Also, strong earnings gave support to the markets. In the week, the Bank of Japan had taken all necessary steps to meet its 2 per cent target in two years and will try to minimize the market disruption from its massive bond buying. Also the promise by the ECB chief to inject liquidity into the banking system was positive news for the markets. For the US markets, the major data to be watched includes Industrial Production and Inflation Data. Also the housing data and retail sales data will be watched.

In this week, Indian markets may be waiting for the outcome of inflation data for March 2013. Also corporate earnings will be in focus -- Reliance is coming out with its quarterly numbers on April 16, 2013. In the options segment, with market conditions, investors can buy a long strangle with buying Nifty April 5500 put options along with buying a 5600 call option. Counters like Axis Bank, Reliance Capital, Reliance Infra, Rural Electrification and RCOM are likely to move up from the current levels. The major support levels for Nifty stood at 5500 and 5450 below these levels more selling can be expected. Resistance stood at 5545 above 5573 and 5610 levels.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended. Feel free to e-mail him at Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

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