Money Tree

GLOBAL MARKETS

US Markets

The US Markets plunged on Tuesday after Moody’s downgraded 399 subprime mortgage backed securities and Standard & Poor’s also said that it may downgrade ratings on $12 billion of subprime related debt, deepening the US subprime mortgage crisis. The stocks of investment banks, brokerages, mortgage and housing related companies saw a sharp cut. Home Depot cut its 2007 earnings outlook on the back of housing slump in the US. Sears Holdings, a retailing chain of US fell about 10 percent to $154.21, J.P. Morgan Chase declined 2.6 percent at $47.51, Walmart Stores fell 1.9 percent to $47.58, Target Corp fell 2.9 percent to close at $64.81, Home builder D.R. Horton was down 2 percent at $19.40 and Countrywide Financial Corp fell 3.7 percent at $35.86. The US markets shed more than 1 percent and there are expectations of further slump in the housing market there.

Dow Jones closed at 13501.70 down 148.27 points or 1.09 percent.
Nasdaq Composite closed at 2639.16 down 30.86 points or 1.16 percent .

Europian Markets

The Effect of lowering of earnings estimates by US retailing companies was felt in Europe and the markets lost more than 1 percent on tuesday.

FTSE (UK) closed at 6630.90 down 81.80 points or 1.22%. .
DAX (Germany) closed at 7964.76 down 112.63 points or 1.39%
CAC (France) closed at 6019.22 down 85.44 points or 1.40%.

Asian Markets

The Asian markets were almost flat with a negative bias.

NIKKEI(JAPAN) closed at 18252.67 down 9.31 points.
HANG SENG (HONG KONG) closed at 22885.84 up 68.41 points.
KOSPI (SOUTH KOREA) closed at 1894.53 up 10.94 points.
STRAITS TIMES (SINGAPORE) closed at 3620.32 down 6.4 points.
Composite Index (CHINA) Closed at 3853.02 down 30.19 points.
SENSEX (INDIA) closed at 15009.88 down 35.85 points.
NIFTY (INDIA) closed at 4406.05 down 13.35 points.

FOREX

USD/ INR 40.40
EUR/ USD 01.36
USD/ JPY 123.24

GOLD

8675/ 10gm

CRUDE

$72.81/ Bb

Today’s Market outlook

Today is the big day with Infosys results coming in and we have very bad global cues. The US markets plunged on concerns of subprime mortgage disaster and a slump in housing sector and the Asian markets have also opened weak today. The Indian ADRs listed in US were also down and Infosys ADR closed almost 2 percent down.

Infosys results

The consolidated net profit at Rs. 1079 crores vs Rs. 1144 crores (QoQ) down 5.68 percent. The company had given a guidance of Rs. 1005.37 crores for the first quarter and it has acheived that. The Net profit is seen above the market expectations of below Rs.1000 crores.

The consolidated trunover stood at Rs. 3773 crores vs. Rs. 3772 crores in the last quarter which is slightly less than the market estimates and expectations. The company’s first quarter guidance for net sales was Rs. 3896 crores and the company has missed it on this front.

FY08 guidance

Revenue growth seen at 29-31 percent.
Q2 EPS seen at 18.88
Q2 revenue seen at 3952-3993
FY08 EPS seen at 78.20-79 with growth of 13-14 percent
Revenue guidance is Based on Rupee rate of 40.58 per dollar.

Well, the first quarter results are good enough but the guidance is not exciting. If the company is seen to grow at a rate of 13 to 14 percent and there are chances of rupee’s further appreciation we hope that not much growth is left in the stock price above Rs. 2000 as some PE contraction should be seen after this kind of guidance, the company may post good results in the quarters to come but at present the first quarter’s results are not encouraging enough as there are other sectors in the market which might produce more than 20 percent growth in the coming year.

As discussed above the global cues are not good today and the much awaited Infosys results have also not produced any positive surprises so we expect a gap down start of trade and 4375 should work as a good support for NIFTY.