Most other Asian markets also dip on worries of rates getting tighter; observers weigh RBI reaction.
Disappointing quarterly results and moderate predictions from information technology bellwether Infosys sent shares falling on Friday. Higher-than-expected inflation for March further dented sentiment.
The Bombay Stock Exchange’s benchmark, the Sensex, fell 310.04 points, or 1.6 per cent, to 19,386.82. At the National Stock Exchange, the 50-stock Nifty index fell 1.5 per cent to 5,824.55. The key Indian stock market indices were the biggest losers among all benchmark Asian indices on Friday. Institutional investors were sellers on Friday. Foreign institutional investors sold shares worth Rs 253 crore, while domestic institutional investors were sellers to the tune of Rs 361 crore, according to provisional data on the BSE website.
Bangalore-based Infosys, which announced its fourth-quarter results and gave its outlook for 2011-12, was the major drag on the 30-stock Sensex. The stock has the second-highest weight, of 9.40, in the 30-stock Sensex, and contributed about 193 points in the index’s fall.
“It is a disappointing start of the earning season. If other IT majors also come up with similar results, the entire sector will see de-rating, as currently it is significantly overbought,” said Piyush Garg, chief investment officer at ICICI Securities. “Higher-than-expected inflation numbers also contributed in pushing indices down.”
Infosys shares opened at Rs 3,304.90 on the BSE and lost Rs 327.10, or nearly 10 per cent, to close at Rs 2,978.90. This was the sharpest percentage fall for the stock since May 19, 2009, according to the BS Research Bureau. “We believe the rupee EPS (earnings-per-share) guidance for FY12 was very disappointing,” said Viju George and Amit Sharma, analysts at JP Morgan, in a note to clients.
“The spread between the guidance upper-end and consensus estimate has never been so high, at least in the last seven-eight years,” the JP Morgan analysts said.
Other IT stocks, too, could not escape the brunt. Tata Consultancy Services lost 1.5 per cent to close at Rs 1,190.55, while Wipro fell five per cent to Rs 449.60 and HCL Technologies declined three per cent to Rs 482.35. Among sectoral indices on the BSE, the IT index was the top loser, as it dipped 6.4 per cent.
The wholesale price index for March, which came in at 8.98 per cent, fuelled concerns over further rate increases by the Reserve Bank of India (RBI). “While we think Friday’s inflation reading calls for a strong rate action, we expect the RBI to balance (softening) growth and (high) inflation by continuing with its calibrated approach. We are pencilling in another 50 basis points hike in both the repo and the reverse repo rate in 2011, including a 25-basis points hike at the May 3 (monetary policy review) meeting,” said Nomura economist Sonal Varma in a note on Friday.
The higher-than-anticipated inflation number hurt rate-sensitive sectors such as banking and realty. The BSE Realty index went down 1.2 per cent, while the BSE Bankex fell 0.95 per cent.
Earlier, most Asian markets declined as higher-than-expected inflation fuelled worries of further tightening in China. Japan’s Nikkei 225 fell 0.65 per cent, Taiwan’s Taiex lost 0.96 per cent and South Korea’s Kospi gave up 0.03 per cent. Surprisingly, China’s Shanghai Composite index ended 0.16 per cent higher.
