BSE Sensex is back to its winning habit – the Indian benchmark index has crossed a key psychological resistance of 18000 to be comfortably perched at the highest level since August 2011, backed by emergence of favorable macroeconomic scenario over the last one month.

Not surprisingly, leading the race among the key index (S&P CNX Nifty) constituents, over the last one month, are rate sensitive stocks such as Reliance Infrastructure (54% gains), JP Associates (40%), Tata Motors (35% gains), Maruti (30%), Axis Bank (28%), IDFC (28%) and DLF (27%).

After a spate of negative news on global crisis and deteriorating fiscal environment back home, finally there is a ray of hope at the other side of the tunnel with headline inflation turning down its head and key interest rates on the brink of downward journey.

[Image Source]

On the global front, the Asian markets remained firm on Japan’s central bank expanding its asset buying program by pumping incremental $130 billion into its ailing economy amid global uncertainties. On the other hand, tremors from the Greek sovereign crisis have also subsided for the time being as the country is all set to buy time with a second bailout and avoid default.

Back home, India’s wholesale-price index slumped to over two-year low of 6.55% in January on declining food prices; further sparking hopes to the RBI’s case of lowering interest rates as economic growth weakens and inflationary pressures remains curbed.

Last month, India’s central bank signaled readiness to soften its harsh monetary tightening spree by cutting the CRR by 0.5% to mark a shift in its policy from fighting inflation to reviving growth. This measure is expected to ease structural pressures on liquidity in the system. However, the RBI had retained the policy repo and reverse repo rate at 8.5% and 7.5% respectively.

  [Image Source] 

Thus, with the reversal in macro environmental factors, stocks from the rate sensitive sectors such as banking, real estate and automobiles are the ones to have joined the party with extra vigor to prop-up the benchmark indices to over October-end highs.

However, not all the optimism is based on improved macro fundamentals, as a part of it can also be attributed to the pre-Budget rally. In fact, every thing is not as hunky-dory on the economic front as is portrayed – for instance, India’s fiscal deficit during April to December 2011 had reached a peak of Rs.3.81 lakh crore, almost hitting the full-year budget estimate of Rs.4.12 lakh crore.

How long do you feel this stock market rally can sustain further?

Related posts:

1. Will US Economic Recovery stall Indian Growth prospects?
2. EU announces USD 1 trillion Rescue package – Sensex flies !
3. Improved Prospects of Revenue Collections to Tame the Fiscal Deficit at 4.5% of GDP
4. Sensex Conquers the Magical 20k mark – What Next?

2011 was not a very Happy year for investors in Indian Stock Markets – Indian as well as international investors lost money to the tune of lakh’s of crore rupees. Benchmark Index lost over 20% from the start of the year.

This year though, Government is taking steps to turn around – The new year has started on a happy note for Indian Stock Markets with Central Government allowing Qualified Foreign Investors (QFIs) to directly invest in Indian equity market. This  will help Indian stock markets to widen the class of investors, attract more foreign funds, and reduce market volatility.

It is a great sign that Government is bringing in reforms to open up Indian capital markets – Till now, Foreign Institutional Investors (FII’s) were only allowed to invest in mutual funds . Though, this is a significant news, somehow investors don’t seem to have taken it in a very positive way – At the point of writing this, Sensex as well as Nifty are both trading marginally in red.

Here are salient features of the new Scheme:

• RBI would grant general permission to Qualified Foreign Investors (QFIs) for investment under Portfolio Investment Scheme (PIS) route similar to FIIs.
• The individual investment limit for QFIs shall be 5% and 10% respectively of the paid up capital of Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India.
• QFIs will be allowed to invest only through SEBI registered Qualified Depository Participant (DP). A QFI can open only one demat account and a trading account with any of the qualified DP.
• DP shall ensure that QFIs meet all KYC (Know your Customer) and other regulatory requirements, as per the relevant regulations issued by SEBI from time to time. QFIs shall remit money through normal banking channel in any permitted currency (freely convertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category – I bank. Upon receipt of instructions from QFI, DP shall carry out the transactions (purchase/sale of equity).
• DP shall be responsible for deduction of applicable tax at source out of the redemption proceeds before making redemption payments to QFIs.

With most of the stock Analysts and experts being under-weight on Indian equities currently, we may not see much participation from QFI’s. However, when the tide turns, I am sure this new reform will help bring more money into Indian capital markets.

Would love to hear your views on this.

[Suggested Reading - Dear FM, are reforms only for foreigners or Indians, too? by R. Jagannathan]

Related posts:

1. The unbelievable amount of investment in India by Foreign Investors
2. Recession or No Recession, India Continues To Woo The Foreign Investors
3. 70 percent of Foreign Investors have achieved profit targets in India!
4. Invest in Indian stock Markets the Happionaire way !

Many-a-times, stock market investors take their investment calls based on certain prejudiced views which are often erroneous in nature.

However, such investors are reluctant to stop following the myths they traditionally believe in, unless they’re explained as to why their views are illogically supported. It is important that investors keep a realistic view of the market terminologies.

Myth 1: Stocks with High PE ratio are Expensive

The most common myth among the investors is that the Price to Earning Ratio (P/E) is the ultimate analytical tool to understand the valuations of a company’s stock price. Even as the P/E is one of the most important gauges to base an estimate on the stock’s valuations, it is not the sole statistical figure that throws light on whether to buy a stock or not.

Investors feel that if P/E is high, stock is over-valued and vice versa. However, that is not correct. Just give a thought – When are share prices allotted high P/E valuations?

The market allots a high P/E to a particular scrip’s valuation when the prospects or fundamentals of that counter is estimated to be an out-performer in terms of earning potential over a period of time, say, for example, 1 year forward earnings.

Even as the stock price could be quoting at a higher P/E valuation currently, the market signal could well be that as proceeds from the higher earnings start trickling in; the valuations of the stock will be rendered with a sobering effect going forward.

Myth 2: Stocks quoting Below Rs.50/- are Cheap

Yet another most common understanding among new investors is that stocks which quote below a certain price range, say, for example, stocks quoting below Rs.100 or Rs.50, are cheap in terms of valuations.

Over here, one must remember that a stock price in no way indicates the actual valuation of the company’s stock. The valuations of a stock price are gauged by factors such as P/E, Price to Book Value, Price Earnings to Growth Ratio (PEG), Earnings per Share (EPS), Return on Assets and Growth Rate among others.

Just imagine, if stocks could have been valued simply by price, people would have never bought stocks which quote above, say, Rs.1000 or 2000. They would always buy stocks within the range of Rs.50-100/-. Don’t you agree?

Suppose you want to invest Rs.10000 in equity markets. With so much money you can either buy 4 shares of Infosys Technologies quoting at around Rs.2600 or 525 shares of Hindustan Motors (HM) currently at Rs.19 per share.

But, if you calculate the percentage rise or fall (let’s assume 3% up) in the stock price of both – 4 shares of Infosys and 525 shares of HM – you will realize that the net gain in actual terms for both the stocks remains same from the fluctuation in the stock prices.

Myth 3: Multi-baggers can be Explored only amongst Mid-caps

The term ‘multi-bagger’ is the most over-rated in the world of stock markets. First of all let’s discuss as to what does a multi-bagger mean? The term multi-bagger is used for stock where the price appreciation has been significantly higher than other stocks.

Usually, we measure the returns from a stock price in terms of percentage price appreciation, for example, 30% gains or 40% gains. Whereas returns from a multi-bagger stocks are measured in terms of certain number of ‘times’ of the original investment or more than 100% returns, for example, a stock ‘X’ has appreciated 2 times or 5 times from the price an investor could have bought.

The most common myth about the term multi-bagger is that most of such stocks could be explored amongst small or mid-cap stocks with lower base size. However, that is not true. Investors can as well explore such multi-baggers amongst fundamentally sound large-cap counters but at a time when the valuations are at their cheapest.

Take, for example, during the recent global recession, several large-cap jewels had sullied at depressing lows. The stock price of Bajaj Auto had slumped to Rs.315/- as on December 5, 2008 and has surged to a Rs.2200/- as on June 8, 2010, a whooping 7 times price appreciation for its lows.

There are plenty myths among investors in the stock markets. But, I’ve mentioned only three of the most common ones in the mindset of gullible investor.

It would be interesting to come across many other myths from the readers’ side?

Related posts:

1. Indian Stock Markets Down 10% – Should Investors Take a Plunge Now?
2. Vantagetrade.com: Simplified Technical Analysis for Stock Market trading
3. Finance Friday: The Fate of Low Floating-stock Counters – Valuation Crunch in NMDC FPO
4. What is it with this Indian Stock Market?

Until now, traders and investors in blue-chip stocks based their buying/selling decisions for a particular stock based on fundamentals and/or technical view on the counter.

However, from now on, the frenzy of speculation in these counters could as well be co-related with one more crucial aspect – the public float of the company.

The government has made it mandatory for all listed companies to have a minimum public float of 25%. Already listed companies, where the public shareholding is below the stipulated mark, will get an option to creep to the limits by way of annual addition of at least 5% in public domain.

The new law would have broader ramifications on the structure of the equity holdings of various listed companies, whether government or privately-owned. The promoters of the companies will have to shed more shares in favour of the public holding, where public float is lower than 25%.

Ramification on IPOs

Companies looking to tap the IPO market to raise funds from the investors will also have to abide by this new law. That’s not all, even equity placements to institutional investors will be excluded from being a part of the public float.

This would mean that companies coming out with fresh public issues will have to announce higher stakes for the portion reserved for the retail investors or ensure dilution of promoter equity by 5% annually over the next few years until 25% public float level is reached.

Queue for De-listing Likely

It is believed that most of MNC listed companies in India are the most reluctant of the lot to dilute their shareholding in the public domain than what is already there.

Apart from that, there are some private companies where the promoters hold a majority portion of the stake whereas the general public own less than 5% stake. Such companies where promoters are reluctant to further dilute their stake to meet the new norms, could lead them to buy-out the remaining public stake in the market and get de-listed from the bourses.

For example, Micro Inks came out with delisting offer few months back. General public hold only 4.61% stake as on March 2010. In short, many such delisting offers could crop-up, within next few years, where promoters are not be willing to dilute their stake further.

An Automatic Disinvestment Mandate for the Centre

With the announcement of this new law, arrives a mandate for the state-owned listed firms with lower public shareholding, to meet the higher divestment targets in confirmation with the new 25% public float rule.

Take, for example, state-owned MMTC and NMDC. General public stake in both the companies is limited to the extent of 0.03% and 0.72%, leaving a room for large amount of disinvestments to be carried out in such PSU firms.

Other large PSU companies such as Power Grid Corporation, PFC, NTPC and SAIL need to divest anywhere between 10-15% depending upon their current status of public float.

What’s in for Investors?

Specifically, for investors it would mean over-all higher stake in both government and private companies. This would translate into lower promoter stake and higher visibility for the company by enhanced public stake and participation.

For government-owned companies, it would mean deeper scrutiny into the operations and policies of the company and, most of all, speedy implementation of the projects triggered by higher transparency. The over-all Indian equity markets would be a better place to invest with higher public say in the management of the listed companies.

The new rules also strengthens the market in the way that higher public float would mean lesser room for manipulation by a few big traders and other financial institutions who have capability to jack-up stock prices on the back of lower volumes on the bourses.

All-in-all, the new rule could well prove out to be an investor-friendly measure and improving the valuations of the company by a strong support from retail investors.

Related posts:

1. Recession or No Recession, India Continues To Woo The Foreign Investors
2. Indian Stock Markets Down 10% – Should Investors Take a Plunge Now?
3. Finance Friday: Why Investors Should Buy Bharti Airtel stock ?
4. The unbelievable amount of investment in India by Foreign Investors

This post may sound a bit philosophical or probably stupid, but I wanted to put across this to readers to get your views.

Why do stock exchanges have to work only from morning till evening? Are they doing anything physically in the evening to sign off the day? I agree, there is lot of mental stuffs going into it, but read on you’ll know what I mean to say…

Let me ask you in this way – why government institutions, offices have to work only from 8 to 5 pm? Why not in night shifts?

You are probably thinking – why am I asking such stupid questions. You think for yourself, what’s holding us from working 24/7? The basic question is since when did we start working during day time? The logic goes somewhat like this…

In the olden days, when there was no electricity, all the countries used to run administration during the day light. Every thing used to come to a grinding halt, once night fell.

The only socializing that went on was people gathering near temples, or meeting places, or in palaces where naach and gaana went on till late in the evening. Basically it was only for relaxing after hard days work.

Even today in villages, once night falls, everything becomes quite after 8 pm.

Now, we have electricity, communication system working 24/7. Then why we are limiting to 8 to 5 pm system? Is it just because our fathers and forefathers did so?

At the moment only industrial units work 24 / 7. Why not offices, government, stock markets?

Let’s take the case of working of stock markets. The market fluctuations in the price of a particular stock keep varying from the minute market opens till it closes. Does that mean that the prices are dependent only on the events that happened during day time?

Take, for example, after closure of Indian stock market for the day some earth quake happens in Korea and Samsung is wiped out off the ground. Does that mean do we have to wait till next day to see its shares (Samsung is not listed in India, its just an example) crash on Indian markets?

What I am trying to say is a natural disaster (wars / earth quakes / tsunamis / plant collapses in other regions of the world) wont wait till your stock market opens. They keep happening 24 / 7. So the markets have to reflect the event in prices every minute. That means it has to operate 24 / 7.

You can as, how is it possible? The answer is simple. Work on 3 shifts of 8 hrs a day. Assume there is a terminal operated by a particular employee of the equity broker. The employee comes to work at 6 am and works till 2 pm and hands over the terminal to his reliever and goes home. The second shift works 2 pm to 10 pm and third shift from 10 pm to 6 am. I mean to say what’s wrong in it? It’s not some unbelievable scene. In power plants the same cycle of schedule happens with utility operators.

Same way our pathetic government services!! Official timings are 9 am to 5 pm. But they work only from 10 to 4. Have you ever seen a single government employee in his place of work for full 8 hours? Most of the time you get to hear,

“Saab bahar gaye hai. Aap baithiye, shayad aate hi honge“

The balance service which government has to render to its civilians keeps increasing. If they use 3 shifts, the productivity increases 300%. Take the case of court cases. There are millions of cases pending. Why don’t they run courts in 3 shifts?

The most important factor to consider over here is that nobody has to invest more on infrastructure. It’s already there. All you do is utilize the available infrastructure for 24 hours, instead of keeping it idle for remaining 16 hours.

Same way no additional infrastructure required for stock markets.

THE BENIFITS:

Already the country is struggling with setting up infrastructure. Without adding to the additional infrastructure, we can increase productivity by 300% in certain fields. (Of course this can not be possible in all places. For example we can not have three prime ministers working in shifts. Ha ha ha… very funny!)

Also, with the available infrastructure we can provide 200% more jobs without adding any investment. Imagine that!! In fact, we may fall short of people and have to import expats, like in the case of gulf countries.

Now, can you start from the beginning? To my question, is it a stupid idea still??

Unless you think out of the box, you can’t see targets. Unless you see targets, you can’t work out of the way. Unless you can’t work out the way, you remain stagnant.

As they say, you must dream then only you struggle to make it happen!

I am sure many of you may think, what a stupid idea, if it was possible, it would have surely happened, but think about it for a second…Looking forward for your views.

Related posts:

1. TCS extends working hours. But, would that really help?
2. When will the bleeding stop?
3. Why In-dian startups stop In-novating?
4. Should we stop the tax breaks for IT industry?

Indian Benchmark indices slumped from 18000 odd levels to settle down at 16770 as on Friday’s closing for the week, down by 7% from the recent peaks. The slump was led by Metal stocks on back of slide in prices of base metals.

No sooner the rating agencies sensed the intriguing troubles of Greek crisis, came the series of downgrades spelling doom for these countries leading to sudden surge in borrowing costs and aggravating their problems.

Stock Markets May have Discounted Greece Crisis

How much is the European Crisis discounted by the Indian markets?
What can be the point of climax for correction in Indian Stock markets?

Firstly, we need to understand that stock markets work on new news and concepts that are still likely to see the light of the day. Old news is almost always factored in by the markets based on its cumulative calculations and fundamental bias. Stocks markets are always futuristic in nature.

Going by that, one can safely assume that the news of Greece crisis and a likely worsening of situation in countries like Portugal and Spain are already discounted to a major extent by the markets by now.

Investors need to understand that the jitters of the Greek crisis are almost factored in even as its bail out requirement is fulfilled as of now by EU and IMF.

In fact, what I feel is stock markets may as well have discounted the fact that this bail out measures may not be enough to solve Greece funding requirements in times to come and may need more support from Germany and international agencies.

At this point in time, I would like to add that Indian stock markets have been an out-performer with respect to slump witnessed in other emerging countries with more reliance on commodity prices and natural resources.

Domestic Market Positioning

Coming back to the domestic markets, the trade figures and manufacturing output suggest that the companies have more confidence to ride through any type of crisis and plan for further expansion processes.

The much affected IT sector that have business exposure to the European countries, have also benefited in a way that the crumbling of Euro has strengthened the US dollar, while the Indian Rupee has slumped to 2 month lows at 45.50.

Fundamentally, nothing much has changed for Indian markets over last few months. The recent correction is only on account of global jitters among the foreign investors in this increasingly globalised world.

A more positive aspect for India is RBI returning towards normalization of interest rates which would be beneficial for the economy over longer term duration. This will aid in creating a bubble like situation in hot sectors like real-estate and other rate sensitive industries.

The move also points towards gradual unwinding of stimulus measures announced by the government during the recession in order to control burgeoning fiscal deficit concerns. Tightening of repo rates and Cash reserve ratio are also aimed at curbing rising inflation by sucking out excess liquidity in to the markets.

Investors need to keep in mind that we’ve just passed the phase of global crisis and the worst could well be over for the time being. And it is unlikely that stocks markets would go through the volatile gyrations and a complete tailspin witnessed a couple of years back.

Knowing the Unknown Crisis

For stock markets to correct sharply from here, it needs some news of official sovereign default by a particular country of Europe. Give the current back drop, it is almost given that the big daddies are well aware of the disparities and bad omen that a sovereign default can bring with itself.

It is but obvious feeling that developed economies holding clout in the respective regions won’t let any sovereign default any time soon unless the crisis spread badly and severely.

Another option that could spook global markets is how fast the contagion can spread across other countries or even across adjoining economies. For instance, there are signs that the ongoing European crisis could gradually spreading to the UK.

Britain needs to urgently address its budgetary deficit. Given that, the hung Parliament position in UK and likely delays in fixing deficit targets could grow into new threat. Britain banks are having sizeable exposure in form of debt to nations like Greece, Spain and Italy.

One another aspect that investors need to keep a tab on is how the Euro pans out coming out of European crisis. Some forex analysts have predicted a break-up of Euro is possible sometime in future. With collapse of Euro, the dollar is likely to further strengthen as a reserve currency which will ensure constant topping-up of the burgeoning US crisis.

Patience Pays!

If stock markets witness a further correction in second half of May and the upcoming month of June, if could provide a smart opportunity for the investors waiting on the sidelines all this while after witnessing a sustained ‘V’ shaped recovery post global recession.

Investors must remember that stock markets are never going to have run away rallies (or even corrections). The game of demand and supply for equity stocks always goes through ups and downs, in the process offering opportunities to tuck-in stocks for those waiting on the sidelines. Patience does pay in the end. You just need to wait for it.

Indian stock markets are currently quoting at their average valuations of 16 times forward earnings, which is not so expensive on historical standards. Markets are fairly valued at this point in time – neither cheap, not expensive.

However, to break its recent peak resistance levels around Sensex 18000 levels, corporate profitability needs to fall in line or even out-perform estimated expectations of the markets during the month of July result announcements. Given that, Indian markets are up for testament from the Rain God in terms of monsoon season and its forecast.

What are your views?

Related posts:

1. Indian Stock Markets: From 18k to 17k in no time !
2. Greece goes Junk – jitters felt globally ! Crisis Gradually spreading across Europe
3. Invest in Indian stock Markets the Happionaire way !
4. The Indian stock Markets gives reason to cheer for Indian Traders

Just a couple of weeks back I was contemplating to write about the journey of Indian stock markets with Sensex crossing 18000 levels. But, to my surprise, I am finding myself writing over here about journey of Sensex from 18000 to 17000 points, a steal of 1000 points from the recent peaks.

Without any doubt it can be pointed out that the contagion risks of Greek crisis are now spreading to other weaker European countries such as Portugal, Spain, Italy and now even Hungary; regarding their susceptibility of exiting the vicious debt traps.

Chinese Woes

To make matters worse for the global bourses, the People’s Bank of China raised banks’ reserve requirements by 50 basis points for the third time this year, hinting towards aggressive unwinding of bail out measures by the emerging markets led by China and India which were announced during global recession.

Commodity stock, especially Metal counters, across Asian markets including India, received a jolt on the back of news of slower growth of manufacturing in China for the month of April pointing towards fears of demand slowdown from the world’s fastest chugging economy.

Copper tumbled to two-month lows under $7000 a tonne even as other metals like Zinc, Lead and Nickel tumbled by 6% on Tuesday. Even Copper witnessed a sharp fall of about 5% on the back of concerns of demand slackening from China and subsequent inventory surge.

Contagion Crisis

Taking cues from the Greek crisis and its contagion spreading across weaker sections of Europe, the Euro tumbled to a one-year low against the dollar at $1.2978, on fears that the sovereign crisis could spread across other euro zone countries. The 10-year yields for Greek, Portugal and Spain struggled at 9.37%, 5.44% and 4.10% respectively.

Hungary’s finance minister stated that it could be difficult to accommodate within the deficit target of 3.8% of GDP and that the gap may reach 6.5%. The official has stressed on the priority to exit a ‘debt trap’ by jumpstarting the growth in the economy.

Shining Gold

The only asset class that mirrored a positive sentimental reaction, as against the fast-spreading European crisis, is Gold – a traditional asset known for its safe haven characteristic. Gold prices surged to one-year high at $1170 per ounce as risk-averse investors flocked to the safety of shining yellow metal.

Indian Stock Market Slump

Coming to Indian stock markets, the benchmark indices had slumped to a nine-week low as foreign institutional investors book gains in emerging markets to offset their losses in crisis-hit European regions.

Leading the slump in Indian indices were Metal counters on concerns of drop in metal prices. State-owned SAIL lowered prices of long steel products on falling demand. This led to fear of yet another round of slackening of demand for ferrous and non-ferrous metals.

Markets Waiting for Cues

The stocks witnessed across the board fall on concerns that the $144 billion bail out package sponsored by EU and IMF for Greece may not be able to contain the region’s debt risks. Further, the budget deficit in Spain is likely to worsen over next few months. Ultimately, this may affect Indian exports to susceptible regions of Europe and fund inflows from there.

At the same time, the crisis in developed nations may also lead to flight of capital to fund their own requirements. Questions are being raised upon ability of Greek government to tackle the budget deficit over next three years just as it comes under the grip of severe recession. Romania’s central bank reduced its benchmark interest rates to stimulate its economy.

Are these aftershocks of global recession or renewed concerns of developed world?

Related posts:

1. The Indian stock Markets gives reason to cheer for Indian Traders
2. Bloodbath in Indian Stock Markets
3. Invest in Indian stock Markets the Happionaire way !
4. Finance Friday: India Growth, Stock Markets, SEBI Regulations & more..

Usually fundamentals take a backseat in the eyes of extreme market conditions. Sentiment led by fear and greed factors come on fore during pessimistic and optimistic times, respectively.

However, when market enters a phase of normalcy and calm consolidation, fundamentals led by earnings performance and guidance gain more significance.

As we approach second week of April 2010, its time to kick start the earnings season for the fourth quarter of FY 2009-10. And as per the ritual, the Q4 seasons chugs on with the earnings performance by none other than IT bellwether Infosys Technologies.

Infosys Delivers a Promising Performance

The IT biggie reported a consolidated net profit of Rs.1600 crore and revenues of Rs.5944 crore for the quarter ended March 31, 2010, summing up to a quarter-on-quarter profit growth of 2.6% and revenue growth of 3.5% sequentially. The quarterly results were as per street expectations.

But, as usual, the street seems always more interested in the future guidance forked out by the company rather than current performance. The Infosys management guided for a dollar-denominated revenue growth of 16-18% for the fiscal 2010-11, which came as a positive surprise for the markets.

Rebounding US Markets – A Cheer for IT Companies

IT spends in the US and other major economies of the world have witnessed a strong rebound, benefiting relatively low-cost outsourcing firms like Infosys and TCS. According to Forrester, the growth in 2010 would be little faster at 7.7% and will mainly be driven by a strong 8.4% growth in the US demand and another 8.3% jump in the Asia Pacific region.

This may lead to top IT companies to report 3 to 5% volume growth for the March 2010 quarter, a view well-verified by the revenue growth of 3.5% for Infosys Technology’s March 2010 quarter performance.

However, going ahead, Infosys is factoring a 6% rupee appreciation in 2010-11. In conjunction with wage inflation, this may pressurize margins in future. The rupee’s appreciation by 1.6 per cent in the quarter affected margins by about 70 basis points.

According to Infosys CEO S Gopalakrishnan, We have been able to take advantage of the opportunities in the market and grow faster because of our investments in capacity and capability building even during the economic downturn.”

Growth led by Domestic Industry

Coming more nearer to the domestic economy, India Inc is expected to wrap-up fourth quarter on a positive note what with the over-all improvement and rebound in the domestic economy.

The net profits of leading large-cap companies are likely to grow in the region of 24-28% year-on-year in the quarter ended March 2010. A re-pricing of deposits should boost margins for PSU banks.

Companies from tariff-war hit telecom sector and pharma companies are likely to post decline in profits. The financial sector would record a measly 2% growth.

Auto and Metals Stocks to Shine

Capacity utilization is approaching pre-crisis levels in sectors buzzing with domestic demand led dynamics. Automobiles, metals and infrastructure companies are expected to log-in strong growth in profit and revenues.

Metals stocks should see margin expansion this quarter on the back of lower base last year due to global crisis. However, the same cannot be told with conviction for non-ferrous metals companies which are hit by higher input costs. Operating margins of ferrous companies is estimated to expand by 2-4% sequentially.

Robust Earnings for Next few Quarters

The Sensex companies are expected to post earnings growth of 33-36% for the fourth quarter of fiscal 2009-10. While the markets are looking to consolidate currently, the focus would revolve back to earnings performance of the companies.

The sharp rise in commodity prices on the back of steep rise in inflation is likely to benefit companies dealing in respective sectors. Steep rise in Crude prices is likely to benefit companies like Reliance Industries and ONGC. At the same time, higher oil prices are likely to hit Oil Marketing Companies such as HPCL, BPCL and IOC.

With return of global recovery and demand for good and services to pre-crisis levels, the earnings are expected to register stronger gains, not only in this quarter, but even in next few quarters to come. However, investors need to keep an eye as to how much of this optimism is already discounted in current stock prices.

Will India Inc post Strong Q4 Earnings this season?

Related posts:

1. Finance Friday: Infosys rolls back freeze, pay hikes proposed
2. After Infosys, Satyam tries the employee sabbatical option
3. Infosys fired 2100 employees. But, are we missing the big picture?
4. Finance Friday : Infosys Results , Industrial Index, Rising Inflation

Rupee has again started scaling heights  that we saw in 2007 & early 2008. I have been following Rupee Dollar exchange rates closely for a while now, and from what I can see 2010 mat well see rupee breaching the Rs. 40 mark once again.

Like I have mentioned before, Rupee is inversely proportional to Stock Market, which in turn is linked with the Economy at Macro level. Things are looking up for India in all major sectors, and 2010 promises to witness 8% + GDP growth.

Last 18 – 24 month were a blip in India’s growth path on back of Global recession, but I think we are back on track now.

Coming back to Rupee – Many people have asked me that rupee has now breached Rs. 45/- mark against the dollar – Should we expect that Rupee will touch Rs. 40 mark in near future (6 – 12 months).

I do NOT have the answer ! But let me try and present you with current situation and reason why Rupee has suddenly strengthened so much.

Yesterday, rupee hit a high at 44.94 to the dollar and ended at 44.96, an 18-month high. It gained 0.6%, or 28 paise from its Friday close at 45.23.

This Rupee rally is mostly due to Foreign funds pouring into Indian markets. 2010 has seen good inflow of FII (Foreign Institutional Investors) money into Indian stock markets, due to which markets are at their peak since Feb 2008. March itself has seen close to $4 billion dollars of FII money, which is one of the best months in recent times.

Contrarily, Dollar has weakened against most other currencies worldwide in last couple of days.

Another factor, which is very important for growth is the political stability. India for the first time in last 10 years looks politically stable with current government bringing in more open and market friendly policies. This has given confidence to FII’s in India story, which turn in reflecting well on Indian currency.

I am not sure about what will happen to rupee in next 6 – 12 months, but I can tell you will confidence that Indian rupee is only going to get stronger in longer term (5 – 10 yrs timeframe), which is based on the fact that Indian economy is going to grow much stronger than any other economy of the world (except China).

Having said all this, strengthening of rupee brings joy to some, but also despair to many others. I will talk about this in detail in another post soon !

Would love to hear readers perspective on what they think about Rupee future against dollar !

Related posts:

1. What is the future of Rupee? Is Dollar going to appreciate?
2. Rupee loses – crosses 45 mark against the dollar
3. Future of Rupee against Dollar?
4. Dollar winning the battle against the rupee