India’s Sensex Caps Weekly Retreat as Infosys Drops on Earnings

Indian stocks completed a weekly decline after the nation’s second-biggest software exporter cut its annual sales guidance.

The quarterly earnings season for Indian companies got off to a mixed start as Infosys Ltd. led declines on the S&P BSE Sensex after reducing its revenue estimate for the second time in three months. Tata Consultancy Services Ltd., the largest software services exporter, climbed 1.6 percent, the most in nearly a month, after reporting profit that beat estimates after the market closed on Thursday.

IndexChangeWeekly 
BSE Sensex+0.1%-1.4%
NSE Nifty 50+0.1%-1.3%
S&P BSE MidCap+0.8%-0.9%
S&P BSE IT index-0.5%+0.7%

“The software sector looks to be a structural short as they cannot grow double digit on a huge base and with persistent weakness in Europe and America,” said G. Chokkalingam, managing director at Mumbai-based Equinomics Research & Advisory Pvt. “Markets are holding on despite the disappointment in software results."

The Sensex gauge rose 0.1 percent at the close in Mumbai after falling 1.6 percent on Thursday. It’s down 1.4 percent for the week. Infosys plunged 2.4 percent, its biggest decline since July 15.

Fund Buying

Global funds have bought $7.7 billion of Indian equities since Jan. 1, surpassing last year’s purchases of $3.3 billion. While the inflows have helped the benchmark gauges rebound 21 percent from a February low, the recovery in company earnings has been uneven.

Infosys said Friday sales in U.S. dollar terms will rise 7.5 percent to 8.5 percent in the 12 months through March. That compares with a July forecast for growth of more than 10 percent. The company also posted second-quarter net income of 36.1 billion rupees ($540 million) and sales, slightly ahead of analyst estimates.

“The guidance was very disappointing,” Rudramurthy B.V., head of research at Vachana Investments Pvt., said by phone from Bengaluru. “The market was expecting a maximum 100 basis point cut in guidance, but 300 points was a bit too much. Still, any three-digit stock price for Infosys is a great buy for someone with a two-year horizon."

Rising global volatility, intensifying competition and Britain’s decision to leave the European Union is fueling uncertainty in the information technology industry. Worldwide IT spending is forecast to be flat in 2016, according to Gartner Inc.

  • Reliance Communications Ltd. rallied 2.6 percent, the most in two weeks, after it agreed to sell its mobile-phone tower business to Brookfield Infrastructure Group for an upfront payment of 110 billion rupees ($1.65 billion) to help reduce debt.

  • TV18 Broadcast Ltd. plunged 6.6 percent, extending Thursday’s 5.4 percent drop, after its second quarter net profit fell 71 percent from a year earlier. 

  • Housing Development Finance Corp., the biggest mortgage lender, and ICICI Bank Ltd., the country’s biggest lender, were the top losers this week with a decline of 6.2 percent and 3.5 percent respectively.

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