IIP nos reported up by 2.4% as against the expectation of negative to flat

The IIP numbers reported yesterday for Nov 08 show a growth of 2.4% as against the street & our expectations of negative to flat growth. Though prima facie it is good & shows that probably economy is growing. However in view of the real economy & ground realities we think this might be an aberration. Our analysis shows that the growth has come mainly due to favorable base effect. The concerns on de-growth of manufacturing sector continue as it is. This is evident from negative growth of capital goods & decline in electricity & mining activity. We remain cautious of the good growth shown by way of IIP number & would like to wait for a few more months to come to the conclusion that growth is back on track.

 

Infosys is expected to declare its  Q3FY09 performance in few minutes from now.

We expect Sales of Rs 5752.7 cr (QoQ growth of 6.2%, YoY growth 34.7%)

EBITDA of Rs 1834.2 ((QoQ growth of 2.2%, YoY growth 31.8%)

Net Profit of Rs 1520.6 (QoQ growth of 6.2%, YoY growth 23.5%)

EPS Rs 26.5 for this quarter

 

Watch out for

 

Revision of annual guidance

Outlook for CY09 budget

Results of vendor consolidation at several key clients

& price negotiations at both existing & new clients

 

Global cues

On the back of concerns on bad corporate performance the US mkts continued their downward journey yesterday falling by 125 odd points. Earning reports are expected to be bad & guidance to be cut. Asian mkts are also trading weak mirroring their US counterparts. SGX is trading flat down by 15 points. Crude has cracked to sub $ 40 levels  along with all other commodities including gold.

 

Our Markets:

In spite of a positive surprise from IIP number our mkts did nit respond showing that the December rally was convincingly snapped. The indices broke down some important technical levels. We were of the opinion a few days back that the bear mkt rally should end but probably the mkt was not finding any reason to do that. The Satyam episode provided that trigger. However we should be clear that if Satyam was the only reason for our mkts to come down then that should have been restricted only to our domestic mkts. But globally too all the mkts are on decline mode. Thus we can fairly conclude that the current rally has snapped.

For today the mkt will react to Infy results &take cues from there on. However the undertone will remain weak.