After Yesterday's Mumbai Attacks, Indian Stocks Should Be Like a Phoenix Rising from the Ashes (INFY)

Includes: INFY, REDF, TTM, WIT
by: Asif Suria
SINLetter pick Infosys Technologies Ltd. (NASDAQ:INFY) reported strong quarterly results on July 11th, with earnings increasing 49.2% to rupees 794 crore ($172.6 million) from rupees 532 crore ($115.65 million) during the year ago period. Revenue grew an equally strong 45.6% to rupees 3015 crore ($655.43 million).

Infosys increased its full year revenue and profit guidance and now expects full year revenue and profit growth of around 40%. This is very impressive for a company that reported annual revenue of $2.15 billion last year. The company also plans to add 25,000 employees in 2006-2007, an almost 50% increase from its worldwide workforce of 52,000 at the end of fiscal year 2005-2006.

Operating margins however dropped from 31.7% to 29.5% thanks to the double-digit wage expansion that most IT companies are facing in India. The 2:1 stock split that was announced in June will take place on July 17, 2006 for shareholders on record as of July 14, 2006.

These spectacular results from Infosys helped the BSE Sensex weather the deadly Mumbai train attacks and the sensex was up 138.8 points as I write this post. With the exception of Infosys and (REDF,) most other Indian ADRs such as Tata Motors (NYSE:TTM) and Wipro (NYSE:WIT) were down on the NYSE on July 11th following the news of the Bombay attacks. Just like the markets bounced back after the London subway bombings and the 9/11 attacks, I expect the Indian market to bounce back after this setback. I bought into the 9/11 drop and if I see a big drop in the Indian market after these attacks, I will start buying again.

INFY 1-yr chart:

INFY 1-yr chart