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Lower-than-expected financial results from Infosys further fuelled the already sombre mood in the markets. But most analysts from major brokerages maintained buy recommendation on Infosys stock.
The IT bellwether missed estimates for profit and future sales growth and also warned of sluggish global economic growth. Market-men said that this might mean that other IT companies will also announce similar results.
“Going forward we could see the other IT major also announce similar results. This could lead to some aggressive selling in the IT sector like we did see on Thursday. The third quarter typically is not a good quarter for IT firms as it is the holiday season in the international markets that they cater to,” said Mr, Alex Mathew, Head of Research at Geojit BNP Financial Services.
On Thursday the BSE IT index was the worst performing among the sectoral indices on the BSE. It was down 3.4 per cent. Infosys was the biggest loser among the Sensex stocks. It was down 4.82 per cent at Rs. 3212.3. TCS was down one per cent, Tech Mahindra 1.35 per cent and Wipro 2.67 per cent. The disappointing numbers from Infosys further pulled down the Sensex which is already spooked by high inflation and low IIP numbers. The Sensex was down 351 points or 1.5 per cent at 19182.
With growth seeming to be moderating here, we might see the foreign institutions starting to evaluate whether markets here deserve the valuations that they are trading at, said Mr. Jagannadham Thunuguntla, Strategist and Head of Research at SMC Global.
However the long term prospects do look good for Infosys, said many analysts. Many brokerages gave the stock a buy or a hold rating even after the results were announced. “Infosys Q4 guidance of 1-2 per cent q-o-q growth in USD revenues indicates a fairly conservative revenue growth expectation. We believe that Infosys is well placed to beat its FY11 guidance given the strong recovery in demand,” said a Deutsche Bank Report. They maintained their buy call on the scrip.
“Overall, a disappointing quarter from Infosys with soft volume growth and muted guidance for 4QFY11. While the near term demand momentum remains good, we believe that expectations are running ahead on ground fundamentals. Further post the recent upgrades, consensus estimates factor in strong volume momentum in FY12/FY13 and we believe that there is limited comfort at current valuations,” said a Religare Capital Markets report.
JM Financial said that they expect Infosys' revenue growth for FY12 to be better than for FY11 and have given a buy call on the stock.
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