Infy results shake up mkts

Tue, 13 Jul 09:30 am

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The Indian markets have started today's session on a volatile note. The benchmark indices opened at the breakeven mark, but soon slipped into the red. They have hovered around the dotted line since then. Other key Asian markets are in the red with China (down 1.8%) leading the pack of gainers. The US markets closed flat yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading mixed with energy and capital goods majors finding investors' favour. The IT pack is leading the list of losers though. The BSE-Sensex is trading lower by around 20 points, while the NSE-Nifty is down by about 5 points. Buying interest is being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.3% and 0.4% respectively. The rupee is trading at 46.90 to the US dollar.

IT services major Infosys announced its 1QFY11 results a while back. The company's sales grew by 4% QoQ during 1QFY11. Operating margins declined to 28.3% during the quarter, from 30.1% in 1QFY10. This was largely due to the impact of higher staff costs. Weaker operating margins and a decline in other income led to the net profits falling by 7% QoQ during the quarter. Despite the weak profit performance during 1QFY11, the management has raised its FY11 earnings guidance. It now expects FY11 earnings per share to be in the range of Rs 112-116, as compared to its previous estimates of Rs 107-112. Revenue estimates have also been increased. The company now expects to grow its FY11 sales by 16-18% YoY as compared to the earlier estimates of 9-11% YoY. The stock of Infosys is currently trading lower on the bourses.

It doesn't matter if the growth in domestic markets is far from being satiated yet. It always helps to diversify one's revenue streams. With this very intention in mind, FMCG companies in India are making a beeline for the markets in continental Africa. Most of the companies feel that there are a lot of similarities in terms of demographics and income levels between India and Africa and thus, it makes immense sense from a business point to view to have a presence in Africa. Infact, companies like Godrej Consumers have already made a couple of acquisitions in the region so that the growth momentum could be further accelerated. It is not going to be long before other companies also follow suit. Besides, the Governments in various parts of Africa have also become a lot open to foreign investment, thus strengthening the case of FMCG players. So, don't be surprised if you hear news of more African assets being snapped up by India based FMCG players in the near future. FMCG stocks are trading mixed currently with gainers being Marico and Nirma while loser being Godrej Consumer.