Sensex drops 300 on Infosys shocker; IT shares struggle

A nasty earnings surprise from technology heavyweight Infosys felled the Sensex by 300 points on Friday, more than wiping out the gains in the last couple of sessions.

Infosys shares fell 21 percent to close at Rs 2,295.45, the steepest single day fall in a decade, as a wave of earnings downgrades appear imminent after the tepid 6-10 percent revenue guidance for FY14.

The BSE Sensex closed at 18242.56, down 299.64 points over the previous close, and the Nifty closed at 5528.55, down 65.45 points. For the week, the indices were down around 1 percent. But for today's bruising sell-off, indices would have been flat for the week. Midcap shares fared slightly better than large caps during the week.

The BSE IT index was the worst performer of the day, shedding plunging 11 percent, as Infosys' disappointing numbers hurt sentiment for the sector as a whole.

"The dismal quarter again raises the question whether Infosys' turnaround story is credible or not," said a note by brokerage house JP Morgan.

"Interestingly, Infosys has stopped giving EPS guidance. It might imply that the
company does not yet have a firm handle on its margin trajectory," the note added. JP Morgan has an overweight rating on the stock with a price target of Rs 3200.

Wipro was the other big loser in the IT space, shedding close to 5 percent. TCS and HCL Tech were impacted to a lesser extent, finishing around 2 percent lower, as market is hopeful of these companies putting up a better earnings performance.

"The management commentary from industry peers will be important to determine whether the pressure faced by Infosys is company-specific or an industry-wide phenomenon," said Dipen Shah of Kotak Securities. Infosys' numbers would further lower the expectations of a market which was anyway prepared for a muted earnings season.

Shares from the FMCG, power, banking and oil & gas sectors found takers, while those from the capital goods, realty and auto sectors struggled.

The gloom over Infosys numbers overshadowed a modest improvement in February industrial output data and March consumer inflation reading.

The index of industrial production for February rose 0.6 percent, against a CNBC-TV18 poll estimating a decline of 1.7 percent. The better-than-expected reading was driven by a 9.47 percent growth in the capital goods sector. But experts cautioned that it was too early to call for a credible recovery.
 
"We did a survey of a few corporates a couple of weeks back; it did not show up any trend of capex activity picking up among those corporates," said Samiran Chakrabarty of Standard Chartered in an interview to CNBC-TV18.

''It could be that it is the smaller corporates where there is some capex activity happening. I would want some confirmation for another couple of months before saying that there is a capex recovery on the way,'' he said.

A view shared by Jyotinder Kaur of HDFC Bank.

"I would be circumspect before looking at it (the spike in capital goods) as a start of a trend," she said in an interview to CNBC-TV18.

"Our own capacity utilization indicators suggest that the capacity utilization levels actually fell in Q4. And what we could be having is the typical bunching up of data that we see that is typical of capital goods series," she said.

Consumer Price Index-based inflation eased slightly to 10.39 in March, compared to 10.91 percent in March, but the reading has been in double digits for four consecutive months now. A softening in inflation, both at the retail and wholesale levels, holds the key to RBI cutting interest rates.

Jaiprakash Associates, JSW Steel, Reliance Communications, Aurobindo Pharma and Canara Bank were among the prominent gainers, rising 3-5 percent. Next to Infosys, Wockhardt was the biggest loser, falling 10 percent. Dish TV and GMDC declined around 3 percent each.

Weakness continued in afternoon trade and the Nifty struggled close to 5500 pulled lower by technology shares. The Sensex was down 267.13 points at 18275.07, and the Nifty fell 55.80 points to 5538.20.

Broader markets too fell further and the breadth deteriorated.

Infosys crashed 20 percent, its biggest fall since 2003, after delivering disastrous Q4 numbers and FY14 dollar revenue guidance of 6-10 percent, which is below Nasscom estimates.

Wipro, Cipla, Coal India, TCS and M&M were the big losers of the day.

Meanwhile, Eveready rallied on the back of battery price hike. The company has hiked prices by Rs 5 per strip of 10 batteries. Speaking to CNBC-TV18 the management said that price increase will be implemented in one-two months and will not impact demand.

Other gainers in the Sensex were ITC, SBI, Hindalco, Bajaj Auto and HUL.

The benchmark indices have lost further ground after European markets opened on a weak note. The Indian market is struggling to find support at lower levels and is trading at the lowest point of the day.

Infosys, the second heavyweight stock in Sensex is down close to 20 percent on dismal results. The former IT bellwether has disappointed the street on all parameters. The stocks is trading below its 200 DMA of 2525.

The Sensex is down 322 points at 18220 and the Nifty is down 77 points at 5517.

The industrial output (IIP) numbers for the month of February has come in better-than expected at 0.6 percent against an expectation of a contraction. The bounce in the industrial output has come due to contribution from consumer goods sector, which turned positive for the first time in a year at 0.5 percent.

Retail inflation declined to 10.39 percent in March, snapping the five month rising trend, as prices of vegetables and protein based items eased. The Consumer Price Index (CPI) based inflation was at 10.91 percent in February . The inflation, however, continued to remain in the double digit terrain for the fourth consecutive month in March.

BSE IT index has cracked 10 percent today. Realty, capital goods and telecom stocks are also bleeding.

Infosys is down 19.86 percent after saying it expects 2013/14 revenue to grow 6-10 percent, lower than market expectations of as much as 12 percent.

Other technology shares HCL Technologies, Satyam Computers Services Ltd, Tata Consultancy Services, and Wipro are down between 2 percent and 5 percent.

Asian shares are also weak after a slightly higher start with the MSCI index of Asian shares ex-Japan trading down 0.3 percent.

The market had grown stubborn and refused to budge from the low point of the day. Even a better-than expected industrial output (IIP) for the month of February failed to lift the market. Industrial output in February was at 0.6 percent against an expectation of 1.7 percent contraction.

The Sensex was still down 248.51 points at 18293.69, and the Nifty slipped 56.55 points to 5537.45. Broader markets were relatively resilient.

Losing 10.4 percent, BSE IT index continued to drag the market led by Infosys which was down 18.2 percent. This is Infosys' biggest fall since 2003 after delivering disastorous Q4 and FY14 dollar revenue guidance of 6-10 percent, which is below Nasscom estimates. Brokerages gave a big thumbs down to the stock and analysts say its margin performance is a key risk going forward & slippages a big cause for concern.

Wipro (down 4.5 percent), TCS (down 2.3 percent) and HCL Technologies (down 1.6 percent) remained under pressure.

M&M and Bharti Airtel were the other losers in the Sensex.

In other stock specific action- Kingfisher Airlines slumped another 2.5% in trade today. SBI Cap trustee has offloaded more than 85 lakh shares of Kingfisher in a transaction worth nearly Rs 7 crore.

Meanwhile, ITC, HUL, BHEL, ONGC and Cipla were the movers of the day.

Berger Paints offer for sale kicked off today. The offer price has been set at Rs 185 a share, a slight discount to its current market price.

March consumer price inflation at 10.39 percent is lower than 10.91 percent in February. Bonds have risen on hopes that RBI will cut rate following the downturn in the pace of consumer inflation.

Slaughter in the Dalal Street continued as investors were nervous about the fourth quarter earnings kick-started by disappointing Infosys . The Sensex was down 262.51 points at 18279.69, and the Nifty fell 62.65 points to 5531.35.

Heavy selling pressure remained in Infosys as the stock was still down 17.1 percent which was the biggest fall since April 2003. It missed revenue growth at 1.4 percent q-o-q at USD 1938 mn. EBIT margins disappointed, dipping 200 basis points q-o-q to a historic low of 23.55 percent vs 25.68 percent. Wipro (down 4.5 percent), TCS (2.8 percent) were too dragging the IT indices by 10.9 percent.

Among the midcaps, Amtek India, BOC India, Core Education, Educomp, Essar Ports and MindTree were the big losers.

However, FMCG stocks have held gains amidst the mayhem in Dalal Street. FMCG Index was up 1.6 percent, led by ITC (up 2.4 percent), HUL (1.2 percent) and Dabur India (up 1.7 percent). Other gainers in the Sensex were BHEL, Bajaj Auto and Cipla.

Kotak Mahindra Bank was up around 1% as the board has approved issue of 2 crore shares to Heliconia at Rs 648 share. It will raise Rs 1300 crore via the preferential allotment.

Sugar companies were all in the green today. Shree Renuka, Balrampur Chini and Bajaj Hindusthan gained around 2 percent. After months of deliberation, oil marketing companies and sugar companies have arrived at a price of Rs 34r/litre for ethanol. This move will provide a steady and additional revenue stream for sugar companies.

Tilaknagar Industries surged 9 percent as liquor baron Kishore Chhabria's Allied Blenders & Distillers is discussing a merger deal.

Infosys seems to have rubbed off energy from the market on Friday with Sensex slumping as much as 318.26 points to 18223.94. The Nifty fell 89.80 points or to 5504.20.

The earnings season, expected to be wobbly, started off on a terrible note as Infosys disappointed the street with dismal fourth quarter earnings , collapsing 16.5 percent in the bargain. The company reported consolidated profit after tax of Rs 2,394 crore, up 1 percent quarter-on-quarter due to other income and lower tax. The consolidated operating profit is fell 8 percent at Rs 2462 crore compared to last quarter.

All the other technology stocks TCS (down 2.7 percent) and Wipro (down 4.5 percent) fell in tandem, dragging the BSE IT index by 9.7 percent.

However, FMCG, pharma, bank and oil and gas stocks were in the green. ITC, HUL, Bajaj Auto were gainers on the Sensex.

Meanwhile, the market will be keenly watching the February's industrial output data to be announced later in the day. According to a CNBC-TV18 poll it is seen contracting by 1.7 percent year-on-year.