Infosys results is a feast day for bears nearly every time

Riken Mehta moneycontrol.com

Bears have profited from Infosys  results on more occasions than bulls, at least on the day of the earnings announcement. As the table below shows, in the past 11 quarters, Infosys shares have closed in the red nine times, shedding between 3-12 percent. 

Bulls have not done too well, even over a longer time frame. In the last 23 quarters, they have managed to trump the bears only on seven occasions.

The weakness in the stock on results day does not every time have to do with missing earnings guidance. Even when the company has managed to meet or better market expectations, unwinding of speculative positions built in anticipation of good numbers has led to pressure on the stock.

Results Date	Close	Change	% Chg
11-Oct-07	1,976.85	-148.2	-6.97
11-Jan-08	1,581.75	-20.8	-1.3
15-Apr-08	1,510.40	88.5	6.22
11-Jul-08	1,676.85	-128.4	-7.11
10-Oct-08	1,225.20	-29.05	-2.32
13-Jan-09	1,228.15	68.45	5.9
15-Apr-09	1,370.60	-38.7	-2.75
10-Jul-09	1,721.15	43.6	2.6
9-Oct-09	2,177.60	-33.2	-1.5
12-Jan-10	2,586.95	97.3	3.91
13-Apr-10	2,781.90	98.8	3.68
13-Jul-10	2,796.75	-99.15	-3.42
15-Oct-10	3,076.30	-108.95	-3.42
13-Jan-11	3,205.20	-172.1	-5.1
15-Apr-11	2,989.50	-316.7	-9.58
12-Jul-11	2,791.55	-129.6	-4.44
12-Oct-11	2,679.35	174.8	6.98
12-Jan-12	2,588.25	-238.35	-8.43
13-Apr-12	2,402.55	-348.1	-12.66
12-Jul-12	2,264.40	-206.6	-8.36
12-Oct-12	2,395.35	-137.85	-5.44
11-Jan-13	2,712.10	389.8	16.79

 

Bear attack: Nearly 30% BSE stocks trading below 2008 lows

Riken Mehta
Moneycontrol.com

This is turning out to be a nasty bear phase; in fact worse than the meltdown during the global financial crisis of 2008.

According to data analysed by moneycontrol.com, 697 out of 2400 actively traded stocks on the BSE are trading below the lows seen in late 2008. Back then, most of the stocks managed to recoup a good chunk of the losses as the market rallied dramatically. Two events changed sentiment for the better; one was the UPA coalition returning to power without the support of the Left parties, and the other was the stimulus package that helped sustained the growth momentum in the economy.

Today, the situation is equally bad if not worse. The economy has stalled, corporate earnings are weak, and political turmoil is holding the government back from taking any major reform measures.

But the key difference between 2008 and now is that many of the problems are company-specific, than having to do with the broader economy. In many of the midcaps and small caps which have fallen 50-80 percent, investors are more worried about accounting policies and corporate governance standards than the earnings growth rate.

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Index	Below 2008 Lows	Total Scrips
Sensex	1	30
Nifty	2	50
BSE 100	9	100
BSE 200	17	200
BSE 500	63	500
MIDCAP	20	249
SMLCAP	75	514

 

Four key events to watch out next week- Infosys, IIP, Trade Balance, Indian Rupee

Riken Mehta
Moneycontrol.com

It has been a bearish start to the first week of the new financial year, with the Sensex lighter by 400 points. The weakness spread to large caps as foreign-owned exchange traded funds are said to have been net sellers of equities, faced with redemption requests from their unitholders in home markets. This has further undermined sentiment, already weighed down by political uncertainty and a slowing economy.

US and Japanese shares are trading at multi-year highs and key European markets have stabilized after the initial nervousness over the bail-out of Cypriot banks.

Investors will now turn their attention to four key events next week.

1. April 10: Trade Balance Data - March

The trade balance data which is the net figure of India’s exports and imports for March, will signal how the annual current account deficit numbers will shape up for FY13. The current account deficit number hit a record high of 6.7 percent of GDP in the October-December quarter, driven mainly by huge trade deficit. The market will closely monitor this figure.

2. Indian Rupee

Another key variable to track will be the rupee. The currency, trading at one-month low, is unable to take advantage of gold prices fallen to a 10-month low. Gold import is one of the prime factors for record-high current account deficit. The other import constituent, Brent crude is trading close to $106.50 per barrel, a fresh five-month low.

3. April 12: Index of Industrial Production (IIP) - February

Index of Industrial Production (IIP) numbers for the month of February will be announced. The eight core industries growth, accounting for 38 percent of the IIP, contracted 2.5 percent in February, a record low performance in decades which should prepare the market for some depressing data. The IIP numbers for January was 2.4 percent, higher than the 1.2 percent estimated by a CNBC-TV18 poll.

4. April 12: Infosys - Fourth Quarter Earnings

Infosys  will announce its fourth quarter numbers on April 12 and set the tone for the near term movement in IT shares. Angel Broking expects former IT bellwether’s EBITDA margins to decline by 91 basis points quarter-on-quarter to 27.6 percent, because of wage hike of 2-3% to onsite employees. The annual guidance for FY14 will be the deciding factor.

Indian Government decontrols sugar: 7 things you need to know

Nasrin Sultana, Riken Mehta
Moneycontrol.com

Cabinet Committee on Economic Affairs (CCEA) on Thursday finally decided to decontrol sugar with certain riders. The sugar industry was the only industry left under the government control. It is learnt that the decontrol is largely in line with recommendations made by the Rangarajan committee . 

What does decontrol mean?

1. Decontrol means no government control. It will no longer force mills to sell sugar to the government at a discount and wont put a limit on the amount that they can sell in the open market.

2. No levy obligation on sugar mills for 2 years. Levy sugar is the amount of sugar set aside from the total production for Public Distribution System (PDS). In levy sugar system, millers were required to contribute 10 percent of their output to the Centre for running ration shops at cheaper rate. This costed the industry Rs 3,000 crore a year, an amount sugar industry will now be able to save.

3. Release order mechanism by which government directed sugar companies as to when, how much to release sugar now goes away.

4. The government will buy sugar from the open market at market rates and subsidise it to PDS. The government will pay the difference between ex-mill and PDS price. Cabinet fixed the price of levy sugar at Rs 13.50 a kg in 2002 and it was never changed since then. 

5. The government will bear Rs 5300 crore PDS sugar subsidy.

6. No hike in excise duty on sugar. Currently it is Rs 95 per quintal

7. Ex-mill sugar price will be capped at Rs 32 per kg for PDS

The government maintained that the decision will not lead to any rise in retail prices of sugar. However, it would double the government's subsidy burden to Rs 5,300 crore annually from about Rs 2,600 crore.

Nifty tests 200-DMA; Reliance Industries, ONGC, DLF slip

 

Riken Mehta
Moneycontrol.com

Indices continue to be listless in the absence of buying support in a week shortened by two trading holidays.The Nifty has broken its 200 Day Moving Average (DMA) of 5620 this morning. A close below 200 DMA, an indicator closely followed by technical analysis, on a consistent basis indicates further weakness ahead.

Political uncertainty is keeping investors edgy. After DMK’s pullout from the UPA last week, Samajwadi Party chief Mulayam Singh on Monday revived talk of the Third Front. N Ram, former editor-in-chief at The Hindu believes Samajawadi Party’s move don’t indicate early elections. “The Indian politics is facing a period of painful uncertainty”, he added.

The Sensex is down 28 points at 18652 and the Nifty is down 5 points at 5628. Live Quotes

The mood in global markets has turned somewhat subdued despite the Cyprus bail-out. The euro is hit by fears that future bank rescues in the euro zone would come with the same stern conditions seen in Cyprus' deal.

The oil & gas sector which was holding the market yesterday is now beginning to crack today. Heavyweights like Reliance Industries and ONGC are down 1 percent each. Reliance Industries has slipped below Rs 800 mark. Full list

Larsen & Toubro has acquired 50 percent stake in Future Generali India Insurance Company owned by Kishore Biyani's Future Group for around Rs 500 crore. Full article

Public sector lenders Indian Overseas Bank (IOB), Oriental Bank of Commerce (OBC) and Syndicate Bank were down 2-3 percent on Tuesday after the ratings agency Moody's downgraded the ratings of these banks on weak asset quality. Full article

Suzlon Energy has successfully completed its USD 647 million bond issue. The proceeds from the issue will be used to pare its existing foreign currency debt. The stock is up 1 percent. Full article

The rupee has slipped to 54.3525/3600, tracking negative local shares and heavy losses in the euro in Asian trade.

Live Indian Markets: BSE Sensex up 110 points; Europe opens in green

Riken Mehta
Moneycontrol.com

The S&P BSE Sensex has erased half of its early morning gains and is now up 100 points after a gap up of nearly 200 points on strong cues from the global markets.

The European markets have open in green. CAC was the biggest outperformer with over 1.5 percent gains followed by DAX up 1% and FTSE up 0.5%.

Traders are now focusing back on the domestic cues and expect the Finance Minister to announce more measures to jump start the sagging economy.

Broking house Sharekhan is bearish on the market. The research firm in it noon update advise traders, “The short-term bias would remain negative for a target of 5550 with reversal around 5810. The medium term outlook would also remain negative, as the index has completed a W-X-Y pull-back and also formed an ending diagonal pattern in the last leg.”

Stocks from interest rate sensitive sectors like banking and realty are rallying on short covering. Buying is also seen in metal stocks.

The broader markets have outperformed largecaps today. Stocks like Essar Oil, GMR Infra, Opto Circuits, Core Education, HDIL, IRB Infra made money for traders.

Safe-haven or popularly termed as defensive stocks in market parlance are trading lower on profit booking. However, if the market loses steam then these stocks will be once again back on buyer’s radar.

The rollover in Bank Nifty is around 18% in afternoon trade. India VIX is down 2.7% at 15.12. Nifty 5700 Put has added 10.5 lakh shares in open interest.

Fresh long position is seen in DLF and GMR Infra. Short covering is witness in Reliance Communications, Shree Renuka and HDIL.

In the currency space, the euro has strengthened above 1.30, while the dollar index has slipped towards 82. Brent crude is steady above 108 dollar levels.

Chart: Dow hits new 5-year high, will Nifty follow suit?

Riken Mehta
Moneycontrol.com

The Dow Jones Industrial Average hit a five-year high to close at 14,296 on Wednesday, topping its previous high of 14,164 made in October, 2007. The US market was hit severely by sub-prime crisis in the late 2007. This was followed by a financial melt down that started in 2008 leading to several people losing their jobs. 

So have things turned around? In recent past, ADP (Automatic Data Processing Inc) data has consistently beaten the estimates, which suggests a revival in the job market in the last six months. A string of upbeat economic data from US has been a cause for rally in equities with traders anticipating recovery in the market despite still relatively high unemployment rate, says Jamal Mecklai.

As per US government data, private companies added 198,000 jobs in February, beating analyst estimates, indicating that the labour market is continuing to thaw. Economists had predicted the count by ADP and Moody's Analytics to show 170,000 new positions, reports CNBC.

As the chart below suggests, the Nifty has been moving in tandem with the US market. The outlook has turned cautious after the rather bruising sell-off, but analysts valuations have become reasonable and so should cushion further downside.