IT stocks reboot as Infosys raises FY 2014 revenue growth guidance

Key benchmark indices eked out small gains after witnessing high volatility during the second half of the trading session. Equities trimmed gains as data showing slowdown in India's merchandise exports in December 2013 offset positive sentiment generated from IT major Infosys raising its revenue growth guidance for the year ending 31 March 2014 at the time of announcement of Q3 December 2013 results before trading hours. The market breadth, indicating the overall health of the market, was negative. The barometer index, the S&P BSE Sensex, garnered 45.12 points or 0.22%, off 212.74 points from the day's high and up 133.32 points from the day's low.

Index heavyweight and cigarette major ITC edged higher. Jubilant FoodWorks dropped after index provider MSCI said it would exclude the stock from its small cap indexes. Reliance Industries (RIL) trimmed gain in late trade. Infosys gained in volatile trade after the company raised its revenue growth guidance in both rupee and dollar terms for the year ending 31 March 2014 (FY 2014) at the time of announcement of its Q3 December 2013 results before trading hours today, 10 January 2014. Many other IT stocks rose as Infosys raised revenue growth guidance for FY 2014. TCS and HCL Technologies scaled record high and Tech Mahindra hit 52-week high. Banking pivotals declined in volatile trade. IndusInd Bank dropped as the bank's gross non-performing assets rose in Q3 December 2013.

Realty stocks reversed intraday gain in volatile trade. Auto stocks dropped. Capital goods stocks reversed intraday gain in volatile trade. In the pharma pack, Dr Reddy's Laboratories scaled record high. Shares of gold financing firms extended Thursday's rally triggered by the central bank allowing non-banking finance companies to lend up to 75% of the value of gold from 60% earlier.

Volatility struck bourses in early trade as key benchmark indices reversed initial gains. The Sensex and the 50-unit CNX Nifty, both, hit their lowest level in more than thee weeks. Key benchmark regained positive zone later. Key benchmark indices extended gains and hit fresh intraday high in mid-morning trade. Firmness continued on the bourses in early afternoon trade. Volatility ruled the roost as the key benchmark indices trimmed gains soon after extending intraday gains in mid-afternoon trade. The Sensex, and the 50-unit CNX Nifty, both, trimmed gains after both these indices hit their highest level in more than a week. Key benchmark indices further trimmed gains in late trade.

The S&P BSE Sensex garnered 45.12 points or 0.22% to settle at 20,758.49, its highest closing level since 6 January 2014. The index jumped 257.86 points at the day's high of 20,971.23 in afternoon trade, its highest level since 2 January 2014. The index fell 88.20 points at the day's low of 20,625.17 in early trade, its lowest level since 18 December 2013.

The CNX Nifty rose 3.10 points or 0.05% to settle at 6,171.45, its highest closing level since 8 January 2014. The index hit a high of 6,239.10 in intraday trade, its highest level since 2 January 2014. The index hit a low of 6,139.60 in intraday trade, its lowest level since 18 December 2013.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,505 shares dropped and 1,034 shares rose. A total of 142 shares were unchanged.

The BSE Mid-Cap fell 0.94% and the BSE Small-Cap index declined 0.62%. Both these indices underperformed the Sensex.

The total turnover on BSE amounted to Rs 2375 crore, higher than Rs 2181 crore on Thursday, 9 January 2014.

Index heavyweight and cigarette major ITC advanced 2.08% to Rs 322. The stock hit a high of Rs 324.45 and low of Rs 314.10.

Jubilant FoodWorks shed 2.56% after index provider MSCI said it would exclude the stock from its small cap indexes. The stock will be excluded from the MSCI global small cap indexes effective on Tuesday, 14 January 2014, MSCI said in a statement late on Thursday, 9 January 2014.

Shares of Jubilant FoodWorks had lost 3.01% on Thursday, 9 January 2014, after the central bank put restrictions on purchases of additional shares of the company by foreign institutional investors (FIIs). The Reserve Bank of India (RBI) on Wednesday, 8 January 2014, notified that the aggregate net purchases of equity shares in Jubilant FoodWorks by foreign institutional investors (FIIs) in primary/secondary markets under portfolio investment scheme (PIS) have reached the trigger limit. Hence, further purchases of equity shares of the company by FIIs would be allowed only after obtaining prior approval of the RBI, the central bank said in a statement.

FII investment cap in Jubilant FoodWorks is 49%. As at 30 September 2013, FIIs held 45.35% stake in Jubilant FoodWorks.

Reliance Industries (RIL) rose 0.52% to Rs 855, with the stock trimming gains in late trade. The stock hit a high of Rs 874.70 and low of Rs 848.45. RIL, which operates the Krishna-Godavari basin's D6 block off the east coast, has reportedly started producing gas from the MA-8 well from 1 January 2014. The well has potential to produce 1 million to 2 million standard cubic metres per day (mscmd) of gas from the well.

Coal India lost 2.43% to Rs 288.50, with the stock sliding on profit booking after recent gains triggered by speculation that the company may announce a hefty interim dividend next week.

Shares of Coal India had risen 7.29% in two trading sessions to settle at Rs 295.70 from a recent low of Rs 275.60 on 7 January 2014, after the company during trading hours on Wednesday, 8 January 2014, said that a meeting of the board of directors of the company will be held on 14 January, 2014, to consider payment of interim dividend, if any, for the year ending 31 March 2014.

Coal India has fixed 20 January 2014 as the record date for the purpose of payment of interim divided.

The market has been abuzz with rumours that the government may force cash rich state-run firms to declare hefty interim dividend to enable the government to meet the fiscal deficit target for the current year.

Dr Reddy's Laboratories advanced 1.47% at Rs 2,626. The stock hit record high of Rs 2,629.95 in intraday trade.

Cadila Healthcare lost 1.53% to Rs 876.80, with the stock sliding on profit booking after recent rally. Shares of Cadila Healthcare had rallied 14.19% in four trading sessions to settle at Rs 890.45 on Thursday, 9 January 2014, from a recent low of Rs 779.75 on 3 January 2014.

Cadila Healthcare on Thursday, 9 January 2014, said it has received final approval from the US Food and Drug Administration (USFDA) to market Sirolimus Tablets 0.5 mg in the United States with 180 days of marketing exclusivity. As per IMS data in 2013, the total market for Sirolimus was approximately $203.8 million in the United States.

Cadila Healthcare also said that the company has received approval from USFDA for Duloxetine delayed release capsules in different strengths of 20 mg, 30 mg and 60 mg. Duloxetine had US sales of about $5.5 billion in 2013.

While Sirolimus tables are immunossuppresssant drugs used to prevent rejection in organ transplantation, Duloxetine delayed release capsules fall in the anti-depressants segment.

The Cadila group now has 86 approvals and has so far filed 216 abbreviated new drug applications (ANDAs) since the commencement of the filing process in 2003-04, the company said.

Infosys gained 2.75% to Rs 3,546. The stock hit a high of Rs 3,575.20 and low of Rs 3,449. Infosys' consolidated net profit jumped 19.4% to Rs 2875 crore on 0.5% increase in revenues to Rs 13026 crore in Q3 December 2013 over Q2 September 2013. The results are as per International Financial Reporting Standards (IFRS). The strong sequential growth in the company's bottom line was due to base effect - Infosys' bottom line in Q2 September 2013 was hit adversely due to a provision of Rs 219 crore during that quarter for one-off visa costs. A sharp surge in non-operating income also aided the growth in bottom line. Non-operating income jumped 43.3% to Rs 731 crore in Q3 December 2013 over Q2 September 2013.

Infosys has raised its revenue growth guidance in both rupee and dollar terms for the year ending 31 March 2014. The company expects consolidated revenue in rupee terms to grow 24.4% to 24.9% for the fiscal year ending 31 March 2014 (FY 2014). This guidance is based on rupee dollar conversion rate of 61.81 for the rest of the financial year. The company expects consolidated revenue in dollar terms to grow 11.5% to 12% in FY 2014.

Infosys and its subsidiaries added 54 clients during Q3 December 2013. The company and its subsidiaries reported a gross addition of 6,682 employees for the quarter.

"The year ahead looks exciting for the IT services industry. We believe the global economic environment has improved and our clients are gaining confidence to invest in their strategic initiatives. We continue to differentiate ourselves to seize growth opportunities. The recent changes in organizational structure will enable us to strengthen client relationships and increase market share," said S. D. Shibulal, CEO and Managing Director, Infosys.

"During the quarter, we saw early but promising results of our initiatives to increase efficiency in our operations. We continue to remain focused on making investments necessary to secure and grow our future," said Rajiv Bansal, Chief Financial Officer, Infosys.

Many other IT stocks rose as Infosys raised revenue growth guidance for FY 2014.

TCS rose 2.07% to Rs 2,290 after hitting a record high of Rs 2,307 in intraday trade.

HCL Technologies gained 1.03% to Rs 1,298.30 after hitting a record high of Rs 1,318.90 in intraday trade.

Tech Mahindra advanced 2.89% to Rs 1,880 after hitting a 52-week high of Rs 1,890 in intraday trade.

Wipro (up 2.1%), Polaris Financial Technology (up 3.73%), Hexaware Technologies (up 0.9%), Oracle Financial Services Software (up 0.35%) edged higher.

Mastek lost 9.13% to Rs 183.15. Shares of Mastek had rallied 28.45% in five trading sessions to settle at Rs 201.55 on Thursday, 9 January 2014, from a recent low of Rs 156.90 on 2 January 2014. The recent rally in the stock was triggered by the announcement of share buyback proposal.

Mastek after market hours on Wednesday, 8 January 2014, said its board approved buyback of maximum of 32 lakh equity shares and minimum of 9.50 lakh equity shares from the open market at a price not exceeding Rs 250 per equity share for an aggregate amount not exceeding Rs 54.50 crore. The buyback offer size represents 14.92% of the aggregate of the company's paid up equity capital and free reserves as on 31 March 2013, the company said.

Banking pivotals declined in volatile trade. State Bank of India fell 2.16% to Rs 1,603.70. The stock hit a high of Rs 1,656.65 and low of Rs 1,600.

AXIS Bank declined 1.52% to Rs 1,166.90. The stock hit a high of Rs 1,196.95 and low of Rs 1,160.10.

ICICI Bank lost 2.04% to Rs 1,030. The stock hit a high of Rs 1,055 and low of Rs 1,015.

HDFC Bank shed 0.29% to Rs 661.15. The stock hit a high of Rs 674.85 and low of Rs 656.80.

IndusInd Bank lost 3.43%. The private sector bank during market hours said its net profit jumped 29.79% to Rs 346.90 crore on 21.67% increase in total income to Rs 2623.76 crore in Q3 December 2013 over Q3 December 2012.

IndusInd Bank's gross non-performing assets edged up to Rs 625.84 crore as on 31 December 2013, from Rs 546.39 crore as on 30 September 2013 and Rs 421.62 crore as on 31 December 2012. The bank's ratio of gross non-performing assets (NPA) to gross advances stood at 1.18% as on 31 December 2013, higher than 1.11% as on 30 September 2013 and 0.99% as on 31 December 2012.

IndusInd Bank's ratio of net non-performing assets to net advances stood at 0.31% as on 31 December 2013, higher than 0.22% as on 30 September 2013 and 0.3% as on 31 December 2012.

Provisions and contingencies rose 60.34% to Rs 126.16 crore in Q3 December 2013 over Q3 December 2012. On sequential basis, provisions and contingencies rose 41.97% in Q3 December 2013.

In terms of RBI circular dated 23 August 2013 on 'Investment portfolio of banks - Classification, Valuation and Provisioning', IndusInd has opted to amortise the depreciation on the Available For Sale (AFS) and Held For Trading (HFT) portfolios on each of the valuation dates in equal installments during current financial year. Accordingly, out of the total depreciation of Rs 93.64 crore as on 31 December 2013, the bank has recognized Rs 37.14 crore as deprecation in the profit and loss account for Q3 December 2013 and Rs 53.51 as deprecation in the profit and loss account for the nine months period April-December 2013, IndusInd Bank said. In accordance with its accounting policy consistently adopted which is more conservative compared with RBI guidelines, the bank continues to ignore appreciation on its AFS and HFT portfolio. The gross appreciation in the AFS and HFT portfolio amounted to Rs 36.16 crore as on 31 December 2013.

In line with the policy approved by the board of directors, the bank had created a floating provision for advances amounting to Rs 50 crores during the quarter ended 30 June 2013. This provision has been made without reference to any specific NPA and is in excess of the minimum requirements prescribed by RBI under Income Recognition and Asset Classification (IRAC) norms. This floating provision has been considered while computing the position of net NPAs, IndusInd Bank said.

Auto stocks dropped. Maruti Suzuki India (down 1.1%), Tata Motors (down 0.45%), M&M (down 2.52%), Ashok Leyland (down 3.91%), Bajaj Auto (down 0.21%), Hero MotoCorp (down 1.85%) and TVS Motor Company (down 1.74%) declined.

Tata Power Company fell 1.17%. The company said during market hours that near midnight of 9th January 2014, a loud thud was observed in Low Pressure Turbine accompanied by fire on the turbine and generator deck of the 250 megawatts (MW) Unit 8 at Trombay. The plant was safely shutdown including safe purging of hydrogen from the generator and safe shutdown of boiler, as the unit was running with about 185 MW capacity. No casualty has occurred nor is any human involved in the event associated with the key plant and equipment, the company said.

The extent of damage and reasons for the event shall be ascertained in due course with engineers of Tata Power and OEM experts from BHEL. The power generation from the rest of the units of Trombay Thermal Power Station remains unaffected, Tata Power said. The company will ensure that alternate power supply is maintained so that the Mumbai consumers continue to meet their electricity demand. The company would like to reiterate its commitment towards safety in and around the plant while ensuring reliable power, Tata Power said in a statement.

Hindalco Industries fell 2.3% after Alcoa Inc, the largest US aluminium producer, reported a massive quarterly loss on Thursday and gave a stagnant outlook on global aluminium demand for 2014. Alcoa said it expected global aluminium demand to grow 7% in 2014, consistent with its 7% growth in 2013.

Capital goods stocks reversed intraday gain in volatile trade. Bhel (down 0.18%), Crompton Greaves (down 3.5%), L&T (down 1.59%), ABB (down 0.87%), Bharat Electronics (down 1.64%), Siemens (down 3%) and Thermax (down 0.12%) declined.

VA Tech Wabag rose 1.17% after the company said it has bagged its first ever order worth $40 million from Dar Es Salaam Water & Sewerage Authority in Tanzania. The company made the announcement before market hours today, 10 January 2014.

Realty stocks reversed intraday gain in volatile trade. DLF (down 1.73%), HDIL (down 1.39%), Godrej Properties (down 1%), Oberoi Realty (down 3.21%), Unitech (down 3.07%), and Indiabulls Real Estate (down 2.17%) declined.

Container Corporation of India fell 0.77%. Container Corporation of India during market hours said that board of directors may also consider declaration of interim dividend, if any, to the shareholders along with Q3 December 2013 results on 31 January 2014.

Motherson Sumi Systems fell 4.59% to Rs 202.75 on profit booking after the stock jumped 16.41% in the preceding seven sessions to Rs 212.50 on 9 January 2014, from a recent low of Rs 182.55 on 31 December 2013.

Apollo Hospitals Enterprise rose 2.27% to Rs 916.05, with the stock recovering on bargain hunting after recent slide. Shares of Apollo Hospitals Enterprise had declined 5.88% in four trading sessions to settle at Rs 895.75 on Thursday, 9 January 2014 from a recent high of Rs 951.75 on 3 January 2014.

Shares of gold financing firms extended Thursday's rally triggered by the central bank allowing non-banking finance companies to lend up to 75% of the value of gold from 60%.

Manappuram Finance (up 15.43%) and Muthoot Finance (up 6.82%), edged higher.

Shares of Muthoot Finance and Manappuram Finance had surged by maximum permissible limit of 20% each on Thursday, 9 January 2014.

The central bank on Wednesday, 8 January 2014, hiked loan-to-value ratio (LTV) to up to 75% for loans against the collateral of gold jewellery from 60% with immediate effect. The central bank further said the value of the jewellery for the purpose of determining the maximum permissible loan amount will be only the intrinsic value of the gold content therein and no other cost elements should be added thereto. The intrinsic value will continue to be arrived as per way suggested by RBI. However, RBI clarified that the need to give a certificate on the purity of gold cannot be dispensed with.

The certified purity shall be applied for determining the maximum permissible loan and the reserve price for auction. The NBFCs can, however, include suitable caveats to protect themselves against disputes on redemption, RBI said.

Deccan Gold Mines jumped 4.87% after the company said it has commenced diamond core drilling in its Ganajur-Karajgi PL block. The announcement was made after market hours on Thursday, 9 January 2014.

Goa Carbon fell 3.46% after the company said it has temporarily shut down operations at its Bilaspur plant in Chattisgarh on account of non availability of suitable raw material. The company made the announcement during trading hours today, 10 January 2014.

VIP Industries rose 3.04%, with the stock recovering on bargain hunting after 3-day 7.38% slide.

In the foreign exchange market, the rupee edged higher against the dollar tracking broad losses in dollar versus other major currencies. The partially convertible rupee was hovering at 61.91, compared with its close of 62.07/08 on Thursday, 9 January 2014.

A $50 billion swap line between Indian and Japan is effective from Friday, 10 January 2014, the Reserve Bank of India said. The agreement, which will be valid till 3 December 2015, aims at addressing any short-term liquidity difficulties. The swap line was initially at $15 billion and following the exchange rate crisis last summer both the countries entered into a pact to expand the line.

On the macro front, India's trade deficit widened in December 2013 on slowing export growth, data released by government today, 10 January 2014, showed. The trade deficit stood at $10.14 billion in December 2013, compared with $9.22 billion in November 2013. Merchandise exports rose 3.49% year-on-year to $26.35 billion, slowing down from a 5.86% pace in November. Imports fell 15.25% year-on-year to $36.49 billion as gold and silver imports dropped.

Industrial production is seen registering a muted growth of 0.9% in November 2013, as per the median estimate of a poll of economists carried out by Capital Market. Industrial production had declined 1.8% in October 2013, against 2% growth in September 2013. The decline in the output of manufacturing sector at 2% and mining sector at 3.5% mainly led to decline in industrial production in October 2013. The government will unveil industrial production data for November 2013 after trading hours today, 10 January 2014.

The Reserve Bank of India's Third Quarter Review of Monetary Policy for 2013-14 is scheduled on 28 January 2014.

European stocks edged higher on Friday, 10 January 2014, as investors awaited data that may show American jobs made the biggest annual gain since 2005. Key benchmark indices in UK, France and Germany were up by 0.47% to 0.74%.

French industrial production rose in November as energy production increased, the national statistics agency Insee said Friday. Industrial production in the euro zone's second-largest economy rose 1.3% in November from the previous month, according to Insee. Insee also revised the industrial production figure for October, saying it fell 0.5%, rather than the previously reported 0.3% decline.

The European Central Bank on Thursday, 9 January 2014, kept its main interest rate unchanged at 0.25% after a monetary policy review.

The Bank of England on Thursday, 9 January 2014, left the size of its bond-buying program unchanged and held its key lending rate at a record low of 0.5%, where it has stood since March 2009. The central bank's Monetary Policy Committee left its asset purchases, the centerpiece of its quantitative-easing strategy, at 375 billion pounds ($617 billion). The minutes from the January meeting will be published on 22 January 2014.

Asian stocks rose on Friday, 10 January 2014, as data showed China's trade surplus narrowed and investors awaited a report on US payrolls. Key benchmark indices in Indonesia, Japan, Hong Kong, and Taiwan rose 0.17% to 1.28%. Key benchmark indices in China, Singapore and South Korea fell 0.05% to 0.71%.

China's exports rose 4.3% in December from a year earlier, according to reported data, after surging 12.7% in November. Imports were 8.3% higher than the year-ago month, accelerating from 5.3% growth in November. The resulting trade surplus was $25.6 billion, narrowing from the previous month's $33.8 billion.

Trading in US index futures indicated that the Dow could advance 35 points at the opening bell on Friday, 10 January 2014. The S&P 500 index eked out a marginal gain on Thursday, 9 January 2014, while the Dow Jones Industrial Average and the Nasdaq Composite index dropped, weighed down by losses for Verizon Communications Inc. and AT&T Inc.

The number of Americans who applied to receive unemployment benefits in the first week of the new year fell to the lowest level since the end of November. In the week ended Jan. 4, initial jobless claims fell by 15,000 to a seasonally adjusted 330,000, the US Department of Labor said Thursday.

The US government will unveil the influential non-farm payroll report for December 2013 today, 10 January 2014.

The Federal Open Market Committee (FOMC) holds a two-day monetary policy meeting on 28 and 29 January 2014. By a 9-to-1 vote, the Fed on 18 December 2013 decided to trim its asset-purchase program by $10 billion to $75 billion per month starting in January 2014. The US central bank is poised to continue winding down its stimulus measures gradually this year.

Janet Yellen, incoming Federal Reserve chairwoman, said in an interview with Time magazine on Thursday, 9 January 2014, that the US economy would see stronger growth this year.

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