Sensex to reverse downturn on better earning prospects

Sensex, closed on Thursday at 11,237.23, a loss of 352.21 pts from its previous week's close.

india Updated: Apr 15, 2006 13:24 IST

India's key share market index is likely to bounce back into the positive zone in the sessions ahead - after witnessing a severe downturn in the past few days - on better earnings forecast by heavyweight companies.

Analysts say while IT sector bellwether Infosys Technologies' bullish earnings guidance will bring investors back into the ring, strong quarterly financial numbers of firms like Tata Consultancy Services will also boost the sentiment.

Tata Consultancy Services, India's largest software company, is expected to unveil its January-March financial report Monday followed by Wipro Wednesday and Satyam Computer Services two days later.

The stock market barometer, the 30-share Bombay Stock Exchange sensitive index or Sensex, closed Thursday at 11,237.23, a loss of 352.21 points or little over three per cent from its previous week's close.

All major financial institutions, including banks and share markets, were closed Friday for a national holiday.

The market, which had touched an intra-day high of 11,930.66 April 7 on large-scale institutional buying interest, recorded its first weekly loss after six weeks.

"A correction in the market was long overdue and the last weekend's sell-off on the bourses should help restore stability in some of the share valuations," said an analyst with a domestic brokerage firm.

"The market is poised to consolidate in the sessions ahead on the back of impressive earnings guidance made by Infosys. Investors would also expect similar projections from other heavyweight companies," he added.

Bangalore-headquartered Infosys Technologies, India's second largest software maker, said Friday its profit in the January-March quarter grew 21 per cent on increased outsourcing by overseas clients.

The company forecast that its sales would increase by 36 per cent to Rs 28.2 billion in the April-June quarter while earnings per share are likely to gain 28.4 per cent to Rs 25.20.

The stock of Infosys, which has posted a fall of half a percentage point in the January-March quarter against a rise of 20 per cent in the benchmark index, fell nearly two percent on the eve of the announcement of its quarterly results.

A section of dealers said the overall stock market trading pattern in the coming sessions would also be influenced by overseas fund inflows into the domestic trading ring.

Foreign institutional investors have sold $137.60 million worth of Indian equities in the current month so far after investing a staggering $1.5 billion in March this year.

In the last three sessions, overseas funds have collectively withdrawn $356 million, sending the benchmark share market index into a freefall.

Massive investment inflows in Asia's second fastest growing economy after neighbouring China on hopes of sustained higher economic growth were helping the index to scale new peaks almost on a regular basis till a week ago.

India's stock market barometer 30-share Bombay Stock Exchange sensitive index or Sensex breached the 11,000-mark for the first time in the history of the capital market on March 21.

The historical level was reached in less than six weeks after shares went past the 10,000-barrier Feb 6 The index rose over 40 per cent in 2005 and is already trading over 18 per cent higher in the current year.

First Published: Apr 15, 2006 11:31 IST