IT clouds shave 257 points off BSE index

The BSE Sensex witnessed the single-highest fall of 256.59 points in nearly seven weeks,as sentiment was dented by Infosys announcing its failure to meet its dollar revenue guidance

Written by ENS Economic Bureau | Mumbai | Published: July 13, 2012 1:04 am

The BSE Sensex on Thursday witnessed the single-highest fall of 256.59 points in nearly seven weeks,as sentiment was dented by Infosys announcing its failure to meet its dollar revenue guidance as well as posting disappointing earnings for the June quarter.

The BSE benchmark index opened a steep 192 points down as Infosys’ first quarter numbers were declared before market hours. As details poured in,all IT stocks,led by Infosys,took a hit and the Sensex lost over 300 points intra-day. The BSE IT Index,having a weightage (of more than 14 per cent),fell over 5 per cent.

Infosys may have delivered a 33 per cent year-on-year jump in its net profit for the quarter ended June 2012 but a outlook of 5 per cent growth in revenues (a cut from its previous estimate of 8-10 per cent) for the fiscal 2013 resulted in its stocks getting hammered to fall 8.15 per cent to close the day at Rs 2,265.

The stock,which has a 7.6 per cent weightage in the BSE Sensex,pulled the index down 1.47 per cent to close at 17,232.55. While Wipro fell by 4 per cent,TCS closed with a fall of 1.8 per cent. TCS announced its results after the markets closed.

Analysts however feel that problems in IT sector are specific to companies.

“What’s not working well for the company (Infosys) is that the management transition has not been strong. After Nandan Nilekani and Kris Gopalakrishnan,the legacy has been interrupted and that’s when the problems started,” said an IT consultant who did not wish to be named,and added that the management transition has been stronger at TCS.

Market watchers feel that Infosys is also underperforming because of its exposure to certain sectors and high employee costs.

“Their employee cost is high and they have a higher dependence on the banking and financial sector,which has been not doing well since 2007-08,” said the head of research with a leading brokerage,and made a case for getting into Infosys at this time. “The company maybe looking for acquisitions and the cash reserve may come handy. Considering the price correction and the opportunities ahead,

Infosys makes a good case for investment.”

(With PTI)

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