Weak IT stocks drag Sensex by 175 pts; Infosys drops 4% on poor USD revenue guidance

Profit taking in technology stocks and Infosys counter in particular led to the weakness in key equity benchmark indices, as the scaling down of full year US dollar revenue guidance by the software firm coupled with the surprise resignation of its chief financial officer dampened the overall market sentiment. The broad market fall came despite the company posting better-than-expected second quarter earnings. Monday, the 30-share BSE S&P Sensex ended below the crucial 27,000-mark at 26,904.11, down 175.40 points, or 0.6 percent from previous close. In absolute terms, Infosys, which commands 7.71 percent weightage among Sensex stocks, contributed 103 points fall to the benchmark index today. [caption id=“attachment_2465594” align=“alignleft” width=“380”]  Reuters[/caption] After opening firm and surging 225 points to touch the day’s high of 27,305.05, the benchmark Sensex failed to capitalise on the upbeat start, as profit-taking came to the fore after the recent buoyancy even as markets across other Asian indices clocked significant gains ahead of key economic numbers from China. As sentiment worsened in the second half, the Sensex plunged to the day’s low of 26,855.75, down 224 points. The broader 50-stock CNX Nifty ended at 8,143.60, down 46.10 points, or 0.6 percent. Market breadth ended marginally lower with 1,442 stocks declining against 1,309 advances on BSE. Other Asian indices such as China’s Shanghai Composite surged 3.3 percent, while Hang Seng rose 1.2 percent and Japan’s Nikkei ended 1.6 percent higher. However, indices across Europe were range-bound with a negative bias. Infosys led the fall, dropping 3.9 percent to Rs 1,122.50 on volumes of over 12.5 lakh shares as against two-week average volume of 2.02 lakh shares on BSE. Intra-day, the stock witnessed sharp volatility as it rose 4.3 percent on strong earnings before reversing the trend on weak dollar revenue guidance and slumped 5%. Earlier today, the company said its net profit during the quarter stood at Rs 3,398 crore, up 12 percent from Rs 3,030 crore posted in the previous quarter, while consolidated revenue was Rs 15,635 crore, up 8.9 percent. Dollar revenue increased 6 percent to $2,392 million from $2,256 million. A CNBC-TV18 poll had seen the company’s profit at Rs 3,244 crore, revenue at Rs 15,210 crore and dollar revenue growth at 3.6 percent. “While results in any one quarter are transitory snapshots of a long journey, we do see our focused execution along our strategy starting to produce encouraging results for our clients, shareholders and Infoscions,” said Vishal Sikka, CEO and MD. However, the company also announced that ts CFO Rajiv Bansal has stepped down, resulting in huge volatility in the company’s shares on the stock bourses. He will be replaced by M.D. Ranganath, the current executive vice president and head of strategic operations. Among other Sensex laggards, shares of Lupin fell 2.2 percent to Rs 2,011.65, Cipla shed 1.7 percent to Rs 676.35, Sun Pharma declined 1.6 percent to Rs 892, HDFC lost 1.4 percent to Rs 1,272.10, TCS eased 1.4 percent to Rs 2,592.40 and Wipro was down a percent at Rs 586.20. However, metal stocks continued to hog the limelight amid strengthening global commodity prices. Shares of Vedanta flared up 7 percent to Rs 110.85, Hindalco shot up 6 percent to Rs 88.65, Jindal Steel advanced 4.5 percent to Rs 72.60 and NMDC was up 2.8 percent to Rs 98.85.