India Morning Report: Infosys shows a lack of forebearance in a sack sack play

English: By Nikhil Kulkarni

English: By Nikhil Kulkarni (Photo credit: Wikipedia)

 

As expected, Infosys rerated the recovery rally with a 15% cut on open pushing thru a 1% increase in US and overall Dollar revenues and beat in Net profit based on other income offered as bait to speculators while the stock possibly returns to its #6 position in Nifty stocks based on Market Cap.

 

The market rally is intact though with a PCR at 0.93 hardly near enough after a smart move from 0.80 in less than a week. Axis Bank though is unlikely to be used by speculators to fill the coffers of the empty Nifty and a Bank Nifty run highly probably for a 1000 points after Indusind Bank reports on Monday.

 

Those looking for a 5650 cap for the Nifty may have been superceded in Nifty targets but for these results but with the PCR provisioning the momentum for earnings outperformers, once you factor out the movement of infosys alone fromthe index values it would still proceed to 5750 levels (ex infy, mail me if you are willing to do the exercise?) The Power NBFCs and the outstanding picks like ITC and IDFC are expected to outperform in business as well not unlike YES Bank and thus are likely to be chosen with ICICI Bank and HDFC Bank as bedrocks of India and Asia portfolios.

 

Critically though, India’s successes with damage control on key attributes of low low information sharing gets a boost with Infosys almost deciding to scupper guidance and India’s data engines will have to work on broader strokes for a long long time to come. Banking, Credit, Economic guidance or otherwise the India forebearance model is equally predicated on old Colonial forms of information blackouts in the public domain and the bedroom entrepreneurs of the country like it that way more than the failure of Bombay Club would have you believe. Granular data is in fact available on more counts in India than attention is given in the press but policy mechanisms and successes of ‘no crisis no new score’ strategies globally in any sphere ensure that the India dream lives along higher interest rates and a hindu rate of growth.

 

The US budget exercise on the other hand , in larger control of global Economic vicissitudes is underway despite the gridlock and with a barely $500 bln for Defence in the Budget proposal and $47.8 billion for State Department ( earlier read as the War Budget) while being part of the larger 2.5 to 1 cuts to revenue based $4 Tln spending cuts managed to increase focus to Asia. That unfortunately means large increase in Iraq, Afghanistan and Pakistan in turn showing the large gap in US understanding of Asia bigger than the wholesome ozone hole created by European Capital flows. The rest is too technical to imagine and should probably be appearing in bit and pieces in future India reports or economic discussion at advantages.us

 

JP Morgan reports when the sun comes up in the US later today probably cementing the big rally banks had in the quarter despite the changes in the mortgages refinance volumes. Derivatives clearing impact starts appearing in global banks in 2014 only as the war for granular bank regulation enters a predetermined longish rollback phase.

 

Contraction in Singapore this quarter (based on Advance GDP), followed by negative IIPs in Malaysia and Mexico are likely to cascade into 2014 after the rosy start post Christmas was wiped out in the vast Asian predilection for property growth as the be all and end all of the ‘organised economy’

 

Infosys destroys brand equity with 8 pawn gambit? Or Infosys lives dangerously?

 

Guidance is actually available in dollar terms rather transparently and infosys has again made a play for Brand infosys by pushing a too muted a guidance in a bid to allow it wiggle space in the client boardrooms and ask for high value business and try and keep its uniqueness intact.

 

Infosys has chosen margin impact in the current quarter in onsite wage increases folloing on increasing White male employment in the US and Europe geographies earlier.

 

Others in Indian IT have long given up, NASSCOM being under new management with MindTree CEO KK Natarajan taking over at its helm , and CTS and HCL looking for volume on negative margins. TCS is unlikely to follow transparency in similar terms when it mixes it up for the fourth estate and the investors next week and try to capitalise on what looks like a sub 20% margin for everyone else except TCS as infy is already down to an op profit of N 26Bln or 23% EBIT and HCL and probably Wipro are sure they don’t really want to push it beyond 15%, settling t a vastly improved 17% in the first case.

 

 

 

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