Wind out of those sails

The market rallied on Wednesday and Thursday on expected lines but the result from Infosys on Friday knocked out the winds from the sails. The markets not only gave up the gains of the week but also closed in negative territory. BSE SENSEX lost 207.67 points or 1.13 per cent to close at 18,242.56 points. The NIFTY lost 24.70 points or 0.44 per cent to close at 5,528.55 points. The broader market saw the BSE100, BSE200 and BSE500 losing 0.28 per cent, 0.42 per cent and 0.44 per cent respectively. The BSE MIDCAP lost 0.73 per cent while the BSE SMALLCAP gained a whopping 0.71 per cent.

Dark days: Bangalore, India: Infosys Chief Executive Officer and Managing Director, S D Shibulal speaks during the company's annual results in Bangalore on April 12, 2013. Shares in Indian outsourcing giant Infosys dived April 12 after it issued a disappointing growth forecast and warned of global challenges, sparking worries about other firms in the flagship sector. Pic/AFP

Gainers
The BSE BANKEX was the top gainer up 2.61 per cent. Other gainers included BSE AUTO up 1.83 per cent, BSE REALTY up 1.77 per cent and BSE FMCG up 1.20 per cent. The losers were led by BSE IT down a staggering 10.26 per cent, BSE METAL down 1.21 per cent and BSE PSU down 0.83 per cent. In individual stocks, Tata Motors was the top gainer up 7.87 per cent followed by ICICI Bank up 4.71 per cent and Hind Petroleum up 4.70 per cent. On the losing side, were Infosys down 19.87 per cent, Jet Airways down 6.23 per cent and Indraprashta Gas down 3.82 per cent.

Shares
Infosys reported results, which were lower than expectation and the share crashed Rs 635 or 21.35 per cent in a single session. This kind of fall has not been seen in Infosys in about 10 years. In the last five quarterly results of Infosys, on four occasions the share has had a down side opening while in just one case, there was an upside gap. On the positive side, one must remember that this company had reported a net profit of Rs 958 crore in the year ended March 2003 which rose 10 times in 10 years to Rs 9,421 crore. The earnings per share were Rs 164.87 and the price earnings ratio 13.9 times based on historical numbers. I believe India does not have too many companies earning a net profit of almost Rs 10,000 crore and having seen their profit increase 10 times in 10 years. The IT industry is facing a tough time and therefore the growth and margins are under pressure. The share hammering seems to be overdone and the share is likely to recover in a day or two.

Gold
The sharp fall in gold prices over the weekend is a clear positive for the Indian rupee and the current account deficit. Gold prices fell sharply to close around Rs 27,750 per 10 grams while silver fell to Rs 48,300 per kilogram. The economy seems to be slipping and though the IIP numbers were positive 0.6 per cent, they were up primarily because capital goods saw a huge jump of 9.5 per cent. The retail inflation eased of to 10.39 per cent against 10.91 per cent, but being above 10 per cent is still not comfortable from the RBI perspective.

Rupee
FIIs continued to be sellers for the second week in a row with sales of Rs 587 crore, while domestic institutions sold shares worth Rs 260 crore. The Indian rupee appreciated to Rs 54.52. The Finance Minister P Chidambaram travels this week to Canada and the US to woo investors. The India story seems to be faltering and one hopes that post his road show, the 10 billion US dollars invested in the first quarter of the current calendar year, stay for good. Secondly, one would sincerely hope that the US markets, which are at a lifetime high, have a rub-off on the Indian markets as well. The week ahead has a trading holiday on Friday and would track the wholesale inflation numbers to gauge whether a rate cut is likely when RBI meets in May 2013 for its review meet. The markets would be volatile in the week and are expected to rally initially before surrendering the gains and ending sideways or with a downward bias.

Levels
Key levels for the SENSEX are 18,100 and 18,450 while similar levels for the NIFTY are 5,450 and 5,625 respectively. The BSE SENSEX has support at 18,173 points, then at 18,071 points, then at 17,972 points and finally at 17,677 points. It has resistance at 18,324 points, then at 18,454 points, then at 18,599 points and finally at 18,760 points. The NSE NIFTY has support at 5,500 points, then at 5,466 points, then at 5,399 points and finally at 5,333 points. It has resistance at 5,552 points, then at 5,600 points, then at 5,663 points and finally at 5,733 points.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.u00a0