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Thursday, January 11, 2007

Infosys Q3 results to dictate trend


The market may edge higher tracking recovery in Asian markets on Thursday after Wednesday’s fall. The Q3 results of IT bellwether Infosys and its Q4 March 2007 guidance will dictate the trend in key indices, Infosys being a heavyweight in both Sensex and Nifty.

Eight brokerages have predicated a between 4.1% to 7.3% sequential growth in Infosys’ Q3 consolidated net profit at between Rs 967.50 crore to Rs 996.70 crore compared to a net profit of Rs 929 crore in Q2 September 2006. These 8 brokerages expect a between 5.7% to 10.7% sequential growth in Infosys’ consolidated sales at between Rs 3646.60 crore and Rs 3819.20 crore, compared to net sales of Rs 3451 crore in Q2 September 2006.

The key factor to watch is the operating profit margin. Citigroup expects a marginal uptick in Infosys’ operating margins. It reckons that better pricing and lower selling, general & administration costs would offset margin pressure arising from appreciating rupee.

But recent substantial FII sales may weigh on the bourses. As per provisional data, FIIs were net sellers to the tune of Rs 797 crore on Wednesday 10 January, the day when Sensex had lost 204 points. They were net sellers to the tune of Rs 414 crore in index-based futures and Rs 235 crore in individual stock futures.

The market has fallen sharply from record highs last week due to FII sales. From a lifetime closing high of 14,014.92 on 3 January 2007, the Sensex has lost 652.76 points (4.6%) in the past five trading sessions. Nifty has lost 173.75 points (4.3%) during this same period. According to technical analysts, the next support level of Sensex is at 13,182 level. If that level is broken, the Sensex may slip to 12,800 they reckon.

Asian stocks were mixed on Thursday. Key benchmark indices in Japan, Singapore and South Korea were up by between 0.25% to 1.4%. Key benchmark indices in Hong Kong and Taiwan were marginally lower.

US stocks ended higher on Wednesday as a surge in Apple Inc.'s shares sparked a rally in the technology sector and Alcoa Inc.'s stronger-than-expected profit boosted optimism about company earnings. The Dow Jones industrial average was up 25.56 points, or 0.20 percent, to end at 12,442.16. The Standard & Poor's 500 Index was up 2.70 points, or 0.19 percent, at 1,414.81. The Nasdaq Composite Index was up 15.50 points, or 0.63 percent, at 2,459.33