Sensex sheds 456 points as Infosys tumbles after Q1 results

The market slumped once again after a minor recovery earlier this week. Spiraling crude oil prices and weak economic data dampened investor sentiments. IT stocks tumbled after IT bellwether Infosys said at the time of announcing Q1 June 2008 results today that the business environment was tough. All the sectoral indices on BSE were in the red. Capital goods stocks slumped.

As per provisional data, foreign funds today, 11 July 2008, sold shares worth a net Rs 467.67 crore. Domestic funds bought shares worth a net Rs 214.74 crore.

Industrial production rose 3.8% in May 2008, much lower than revised 6.2% growth in April 2008, the government data released today, 11 July 2008, afternoon showed. Industrial production growth for April 2008 revised downwards to 6.2% from earlier 7%.

Inflation based on the wholesale price index rose 11.89% in 12 months to 28 June 2008, above the previous week's annual rise of 11.63%, government data released today, 11 July 2008, afternoon showed. It was the reading since annual numbers in the current series became available in April 1995.

Crude oil flared up 3.57% to $145.70 a barrel today amid growing worries of threats to supplies from Nigeria and Iran, as well as concern over a Brazilian oil workers strike next week.

The 30-share BSE Sensex lost 456.39 points or 3.28% at 13,469.85. Sensex plunged 574.90 points at the day’s low of 13,351.34 hit in mid-afternoon trade. At the day’s high of 14,066.36, the Sensex gained 140.12 points at the onset of trading session.

The broader based S&P CNX Nifty was down 113.20 points or 2.72% at 4049. Nifty July 2008 futures were at 4040, at a discount of 9 points as compared to spot closing.

The BSE Mid-Cap index was down 2.01% at 5,365.34, while the BSE Small-Cap index was down 1.40% at 6,713.66. Both the indices outperformed the Sensex.

The market breadth was weak on BSE, with 1655 losers outpacing 995 gainers. 61 stocks remained unchanged.

BSE clocked a turnover of Rs 5299 crore as against Rs 4,825.81 crore on Thursday, 10 July 2008.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries declined 1.36% at Rs 2016.40.

IT shares declined sharply. TCS (down 8.03% at Rs 799.20), Satyam Computer (down 7.19% at Rs 444.45), and Wipro (down 4.34% at Rs 412.30), slipped. The BSE IT index underperformed the Sensex, falling 6.73% to 3,907.63.

India's second largest software exporter by sales Infosys Technologies slipped 7.18% at Rs 1,676.45. Infosys’ chief operating officer S.D. Shibulal said he expected pricing to remain stable in the current year ending March 2009 (FY 2009), with no opportunity for uptick.

Infosys today reported 4.2% growth in consolidated net profit to Rs 1302 crore in Q1 June 2008 over Q4 March 2008. Revenue rose 6.8% to Rs 4854 crore in Q1 June 2008 over Q4 March 2008.

Infosys has revised upwards earnings and revenue guidance for the year ending March 2009 (FY 2009). Infosys has forecast 24.4% to 26.6% growth in earnings per share as per Indian GAAP at between Rs 98.79 to Rs 100.51 in FY 2009 over the year ended March 2008 (FY 2008). It has forecast a between 27.5% to 29.5% growth in revenue at between Rs 21278 crore and Rs. 21622 crore in FY 2009 over FY 2008.

However, Infosys has not revised its earnings as well as revenue guidance in dollar terms i.e. as per US GAAP, which means that the upward revision in earnings and revenue guidance as per Indian GAAP is just due to a sharp fall in rupee against the dollar.

Capital goods declined after the data showed growth in capital goods sector declined sharply in May 2008 over May 2007. The BSE Capital Goods index underperformed the Sensex, falling 4.99% to 10,774.38.

Larsen & Toubro (down 6.89% at Rs 2,357.20), Punj Lloyd (down 6.25% at Rs 211.55), ABB (down 5.80% at Rs 851.75), and Bharat Heavy Electricals (down 2.68% at Rs 1,521.25), tumbled.

Banking stocks also witnessed selling pressure on fears of further monetary tightening by the Reserve Bank of India to control the surging inflation. Yet, the BSE Bankex outperformed the Sensex, sliding 1.95% to 6,044.76.

India's largest private sector bank by market capitalization ICICI Bank declined 4.09% at Rs 591.55. Oriental Bank of Commerce (down 4.23% at Rs 134.75) and Axis Bank (down 1.38% at Rs 669.60) declined.

India’s largest commercial bank State Bank of India fell 0.97% to Rs 1222.25. The bank is likely to report double-digit net profit growth in the Q1 June 2008, Chairman O.P. Bhatt told media reporters today.

Top Sensex losers were, Jaiprakash Associates (down 8.48% at Rs 156.50), Reliance Infrastructure (down 6.28% at Rs 801.40), Housing Development and Finance Corporation (5.52% at Rs 2000.55), and Tata Steel (down 4.69% at Rs 666.15).

India’s top cellular service provider by sales Bharti Airtel rose 0.44% at Rs 745. It came off from early high of Rs 798.65. As per reports, the company added 2.56 million users in June 2008, taking its total user base to 69.4 million.

Stock broking firm Edelweiss Capital plunged 5.57% to Rs 524.35 after the company posted 10.08% fall in net profit to Rs 6.78 crore on a 84.52% rise in total income to Rs 56.63 crore in Q1 June 2008 over Q1 June 2007.

Reliance Capital clocked the highest turnover of Rs 390.20 crore on BSE. Infosys Technologies (Rs 358.48 crore), Reliance Industries (Rs 279.34 crore), Reliance Infrastructure (Rs 176.79 crore) and Larsen & Toubro (Rs 147.61 crore), were the other turnover toppers on BSE in that order.

IFCI reported highest volume of 2.10 crore shares on BSE. Reliance Natural Resources (2.01 crore shares), Lotus Eye Care Hospital (1.94 crore shares), Ispat Industries (1.58 crore shares) and Chambal Fertilisers & Chemicals (1.04 crore shares), were the other volume toppers on BSE in that order.

European markets, which were mostly higher earlier, declined as the session proceeded. Key indices in UK and France were down 0.08% to 1.09%. However, Germany's DAX index was down 0.10%.

Asian market which opened before Indian market rose, boosted by a report that the US government is weighing the takeover of top US mortgage lenders Fannie Mae and Freddie Mac which have been under fire on fears they may not be able to get the capital they need to survive. Key benchmark indices in Hong Kong, Japan, Singapore, South Korea and Taiwan were up by 0.87% to 2.39%. China's Shanghai Composite index was down 0.65%.

US stocks rose on Thursday, 10 July 2008, helped by optimism about a major deal in the chemicals sector and after the Federal Reserve chairman said the central bank and the government are focused on stabilizing the financial system. The Dow Jones Industrial Average rose 81.58 points or 0.73% at 11,229.02. The tech-laden Nasdaq Composite index rose 22.96 points or 1.03% to 2,257.85.

From a record high of 21,206.77 hit on 10 January 2008, Sensex has lost 7736.92 points or 36.48%. It is down 6817.14 points or 33.60% in calendar year 2008 so far.

Caution may prevail on the bourses in the near term due to political uncertainty as to whether the government will be able to win confidence vote in the parliament. Reports suggest that government may hold a special session of parliament shortly to seek vote of confidence following withdrawal of support to the government by Left front this week.

The government is confident of retaining power due to backing from Samajwadi Party, a regional party in Uttar Pradesh. Left has withdrawn support to protest Indo-US nuclear deal.