Mumbai: Indian shares dropped 0.2% on Tuesday, tracking weak global equities, but Infosys Technologies bucked the trend and rose nearly 4% in the day on bullish annual revenue growth forecast.
The IT bellwether’s stronger-than-expected annual sales forecast suggests a gradual recovery for India’s software services sector as global clients loosen their purse strings in an improving economy.
Infosys forecast 2010/11 revenue to rise 16-18% in US dollars, higher than the 12-15% target expected by most brokerages.
Bangalore-based Infosys expects earnings per share (EPS) to rise 4.3-8.6% for the full year after a 150 basis point drop in margins.
“...Infosys has outperformed its EPS guidance significantly over the last three quarters and EPS outlook could be perceived as management being too conservative in our view,” Morgan Stanley analysts said in a note.
The stock closed 3.7% higher at Rs2,782.35, its best close in almost three weeks.
More than 1.8 million of Infosys shares were traded on the BSE, more than 17 times the daily average over the last 30 days. The 30-share BSE Index closed 0.17% or 31.04 points lower at 17,821.96 points, its second straight decline.
Two-thirds of its components closed in the red.
Other software stocks also closed higher. Sector leader Tata Consultancy Services and third-ranked rival Wipro rose 2.8 and 2.5% respectively.
Vaibhav Sanghavi, director of Ambit Capital expects corporate earnings for the March quarter to be largely in line with expectations.
“The topline is definitely going to be robust. But, we need to closely watch margins, which could see some pressure from higher commodity and employee costs,” said Sanghavi.
“The focus is definitely on the outlook.”
The benchmark is up 2% so far in 2010. Foreign funds have poured in around $5.2 billion in Indian equities so far in 2010, a part of which was invested in primary market offerings.
Financials led the losses as voices from the ministry pointed the central bank may hike key rates at its policy review next week.
The Reserve Bank of India is expected to further tighten its monetary policy, R. Gopalan, secretary for financial services in the finance ministry said in New Delhi.
Top lender State Bank of India closed barely changed while top private lender ICICI Bank fell 2.4%.
Mortgage lender Housing Development Finance Corp dropped 2.7%.
Top motorcycle maker Hero Honda nosedived 5.3% to Rs1,976.45, as the stock traded ex-dividend.
Energy giant Reliance Industries, which has the highest weight on the Sensex, declined 0.4% at Rs1,120.75.
In the broader market, losers outnumbered gainers in the ratio of 1.1:1 in a volume of 394 million shares, less than that on Monday.
Elsewhere, The FTSEurofirst 300 index of top European shares was down 0.2% at 1145 GMT. The MSCI index for Asian markets other than Japan shed 0.7%.
The 50-share NSE index dropped 0.3% to 5,322.95 points.
Indian markets are closed on Wednesday for a public holiday.