Weekly Markets: Sensex drops on Infy nos, inflation data

The markets reversed it's last two week rally amid high volatility in a holiday shortened week. Infosys' dissapointing earnings estimate and rising inflation dented market sentiments at close.

The holiday shortened week saw the Sensex drop 65 points to 19,386. The index opened the week at 19,383 and touched a high of 19,737 on Wednesday - Tuesday being a holiday on account of Ram Navami. Thursday market stayed shut for Ambedkar Jayanti. On the last trading day of the week, indices plunged after IT major Infosys came out with its quarterly numbers.

Industrial production rose 3.6% in February 2011. However, market was expecting IIP growth to be at 4.8%. Manufacturing output rose an annual 3.5% in February 2011. January's industrial output annual growth rate was revised upwards to 3.9% from 3.7%. The wholesale price index rose 8.9% in March 2011, higher than 8.3% rise in February 2011 and also ahead of market expectations.

Crude oil continued to hover around higher levels. High oil [prices have raised concerns of a widening current account deficit and higher oil subsidy bill.

Infosys reported marginal rise of 2% in its consolidated net profit at Rs 1,818 crore for the fourth quarter ended March 2011 on sequential basis. The company had reported a net profit of Rs 1,780 crore in the December quarter. For the quarter ending June 30, 2011 the company expects revenue to be in the range of Rs 7,311 crore and Rs 7,382 crore; growth of 18.0% to 19.1% y-o-y.

"The results were tad below expectations. At Rs 3306, if Infosys had delivered 25-30% topline and 15-20% bottomline growth, we could have seen more upside on the stock. The scrip is down 7% due to profit booking," said Gaurang Shah, AVP, Geojit BNP Paribas Financial Services.

Infosys was the biggest loser among Sensex stocks, plunging 7.3% to Rs 2,989. Other IT stocks dropped. Wipro tumbled 3.5% to Rs 450. TCS ended flat at Rs 1,190. Other losers included Core Projects, Oracle Financial Services and Tech Mahindra.

IT index, as a whole, slipped 4.5% to 6,259. BSE realty and metal indices dripped 1-2% each. Meanwhile, FMCG index surged 2% to 3,713. Bankex gained 0.6% in the week to end at 13,383.

Among banking stocks, ICICI Bank and HDFC Bank ended on a flat note at Rs 1,101 and Rs 2,360, respectively. However, Federal Bank rallied 5% to Rs 445. Yes Bank and IndusInd Bank jumped 3% each. Canara Bank, Kotak Mahindra Bank and Bank of Baroda were up 2-3% each.

"We expect markets to continue to consolidate at current levels. The earnings season has started on a weak note following disappointing numbers from Infosys. Inflation at 9% for March 2011 raises risk of further monetary tightening (negative for banks). Crude oil prices have also stayed firm. Thus considering these negatives, a minor correction is not ruled out," said Sanjeev Zarbade, Vice President - Private Client Group Research, Kotak Securities.