Infosys, IIP & Inflation

July 13, 2011   ·   0 Comments

For Q1FY12, posted a 5% sequential drop in its net profit at Rs.1722 crore though YoY, it was up 16%. EBIT margin for the quarter was at 26.1% as against expectation of 27.1%. The market is overtly perturbed about the drop in its guidance for FY12. It expects EPS for FY12 at Rs.128.20-130, revenues at Rs 31,777-32,311 crore. In dollar terms, EPS growth is seen at $ 2.88-2.92 for FY12. And for Q2FY12, expects revenues at US$ 1.73-1.755 billion and EPS of USD 0.67-0.68, a growth of 3.1-4.6%.

www.stockssavvy.comBefore the market could even get over the management interviews on television, news came in about the IIP numbers, which, as expected, were not good. May IIP was down at 5.6% v/s 6.3% on a MoM. So if we felt that April had been a month of moderation, well, May shows that this moderation might well slip into a slowdown in the coming months.

With consistent rate hikes and lack of Govt policy action, investments are down. With rates going up, what we are seeing in May is a slow but steady fall in consumption. Undoubtedly, there is moderation on the demand side for white goods, consumer durables and intermediate goods, which has seen the sharpest fall.

PARTICULARS May ‘11
IIP 5.6%
Consumer Durable 5.2%%
Manufacturing 5.6%%
Capital Goods 5.9%
Basic Goods 7.2%
Consume Non-Durable Goods 5.6%
Mining 1.4%
Electricity 10.3%
Consumer Goods 7.7%
Intermediate Goods 0.9%

 

 

 

 

 

 

The fact is that the negatives for the markets remain. IIP is not good and things are not good on the Europe front too. Q1FY12 numbers, as has been indicated, might not be a positive trigger in that sense.

The RBI is scheduled to meet on 26th July and most expect a 25 bps hike. Inflation is yet to come under control. But the RBI seems to be missing the point that just playing on the interest rates is not going to help. Work is needed on working out the logjams on the supply side. We are going to have a record food harvest this season, yet, ironically, neither the farmer earns nor do we pay less. That is where the Govt needs to pay attention; merely hiking rates and making things all the more expensive is only aggravating things.

What we could see is that RBI rate hikes, maybe two more on the anvil, will happen purely based on data coming in. Yes, we are sure to see RBI moderating the rate hikes and after the aggression in May, it seems to be treading on a very thin rope. Till now, it could hike rates, without paying too much heed to growth but today, obviously, the rates hikes have started hurting the industry and now, it does need to go slow or else it could topple the entire fruit cart.

Let us keep all eyes skywards – pray that the rain Gods remain kind and we have a normal monsoon this year. That in itself will solve quite a lot of problems and that of RBI too. And yes, hope the ministers, with their new portfolios will actually get some work done. Now that is like hoping for a miracle!

Source: Premium investments

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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