MARKET AWAITS THE THREE "I" - INFOSYS , IIP & INFLATION
By Ruma Dubey
Tomorrow is a big day for the markets; like it has been happenings on many occasions, the much awaited Q4 and FY13 numbers from Infosys are scheduled to be announced. This in a way officially marks the beginning of the “results season” much like the green shoots heralding the onset of spring. And just as we finish trying to understand the numbers and scrutinizing the guidance, the Central Statistical Organisation (CSO) will hit us with the Feb IIP numbers and this will be soon followed with the inflation numbers for March. That will pretty much seal the moods for the day.
So what to expect? In case of Infosys, more than the Q4FY13 and FY13 numbers, we need to keep an eye out for the guidance that it will give for FY13 as that in a way is the roadmap the company see’s for itself looking ahead. Infosys is reputed for giving conservative guidances as it prefers to call out lower numbers and then overachieve. For Q3FY13, when all were expecting a poor performance and a further cut back in estimations, Infosys sprung a pleasant surprise by beating all expectations of doom. It posted a consolidated net profit at Rs.2,369 crore for the quarter ended December 2012 v/s Rs.2,372 crore on YoY. Revenue was at Rs.10,424 crore, up 6%. Revenues excluding Lodestone was at Rs.10,210 crore, which is a QoQ growth at 3.6% and YoY growth at 9.8%. The part which really made the markets happy were the estimations for FY13, which after 8 quarters was actually upped. The company expects revenue at least Rs.40,746 crore and has guided EPS to be at least Rs.162.80. It has assumed conversion of 1 US$ at Rs.54.50 for rest of fiscal 2013. The company expects 2013 to be much better than 2012 and this is reflected in the guidance. Now we first need to see if it matches or exceeds the above given estimates and then look at what it gives for FY14.
And then the Feb IIP numbers. Jan IIP numbers came in as a pleasant surprise at 2.4% v/s wide expectations of around 1.5%. The growth was driven by electricity, coming in at 6.4%, the highest over the last few quarters. But capital goods continued to trail downwards and manufacturing showed a little bit of improvement at 1.1% v/s a degrowth in Dec. Consumer non durable improved dramatically, from a negative 1.4% in Dec to a growth of 5.3% in Jan. Though the data was encouraging, the “good feeling” was short lived as the consumer price index-based (CPI) inflation for February rose to 10.9%, the third successive month when it has been above the psychological mark. And this rising inflation, was mainly on account of higher food prices and less on account of fuel prices. Let's see what inflation reading we get now.
And irrespective of Infosys numbers or Feb IIP, or CPI there is not much expectation from the RBI, which will announce the credit policy on 3rd May. Inflation remains stubbornly high and Subbarao will continue to maintain his hawkish stance on prices and sit tight on rates. As such it would be naïve to expect a rate cut at this juncture.
What we are seeing is a broad based slowdown. There is no major pick up on supply and typically, starting from this time of the year, food prices are usually high due to the onset of summer. Manufacturing inflation is there, cost of manufacture has gone up but most are not able to pass on the costs to the consumers as demand, as such is low. It is really frustrating that despite RBI going behind inflation with such vengeance, it just refuses to relent and growth has become the sacrificial lamb in this fight to curb inflation. But then again, if probably RBI had not been as aggressive as it has been, maybe growth as such would have suffered as inflation would then have shot through the roof, affecting demand.
Maybe we will write off FY13 as one of the worst years of India Inc and hopefully FY14 will bring in good tidings. Let us just hope that what we are seeing now is the last of the bottoming out and soon, in a few months we could see some uptick. Anyway, corporate results will keep the markets ticking for some days now….