Investors cheer Infosys' performance

Tue, 12 Jan 11:30 am

   Previous Close   

   Pre-Open   

   09:30 am   

   01:30 pm   

   Closing   

After a weak start, the Indian stock markets managed to recover and traded in a narrow range during the previous two hours of trade. Currently, stocks from the banking, realty, metal and FMCG sectors are trading weak, while stocks from the IT, telecom, oil & gas and auto sectors are finding favour.

The BSE Sensex is trading in the green, up by about 10 points, while the NSE Nifty is trading lower by 4 points. The BSE-Midcap and BSE-Smallcap indices are trading higher by 0.4% and 0.9% respectively. The rupee is trading at 45.46 to the dollar.

India's second largest IT exporter, Infosys, declared its 3QFY10 results today. The company bettered performance by registering a topline growth of 3% QoQ during the quarter backed by around 6% increase in volumes and strong deal flow particularly from the US and banking and financial services vertical. However, industries like manufacturing and telecom still remain muted. The company expanded its operating profit margin by around 1% despite weaker dollar and increase in employee cost and sales and marketing expense. The bottomline also increased by 3% QoQ on account of higher volumes.

Infosys outperformed its own revenue and EPS guidance for this quarter by a decent margin of 5% and 18% respectively. It now expects an overall growth of 3.8% and 2.4% in revenues and EPS for FY10. We believe that company's consistent better than expected performance as well as the future guidance is a testimony of improving demand environment for the IT services industry. Infosys, along with its other IT peers like TCS and Wipro is trading in the positive.

According to a leading business daily, Indian FMCG major, ITC is planning to launch new products in the personal care space in the current year. It plans to enter talcum powder space either under its existing brands like brands Fiama Di Wills, Vivel and Superia or an all together new brand. It will subsquently enter the deodrants and skin cream categories by leveraging the talc business. It is believed that this strategic move is logical in the sense that the company has no presence in the talc and deo categories where the rivals like Dabur, Emami, Procter & Gamble, HUL are quite strong. We believe that the company will need a very strong product as well as perseverance in order to gain foot hold in the skin care market which is difficult to penetrate. FMCG stocks are currently trading in the red.