The Indian stock market indices had a weak outing today as stocks languished in the red throughout the trading session. Persistent selling across index heavyweights caused the indices to close well below the dotted line. While the BSE-Sensex closed lower by around 310 points (down 2%), the NSE-Nifty closed lower by around 87 points (down 1.5%). The BSE Midcap and BSE Small cap were at the receiving end as well as they closed lower by 0.2% each. IT stocks weighed heavy on the indices today on account of a disappointing set of numbers announced by Infosys.
As regards global markets, Asian indices closed in the red today while European indices have opened on a mixed note. The rupee was trading at Rs 44.45 to the dollar at the time of writing.
Infosys (NASDAQ:INFY) saw its stock price decline by as much as 10% today. This was due to lackluster results announced by the IT bellwether for the quarter and year ended March 2011. The company's sales grew by 2% QoQ during 4QFY11 and were aided by decent performance of its key segment. The company's main business of 'application development and maintenance' (38% of total sales) witnessed a growth of 2% QoQ mainly on account of a 5.3% QoQ growth in application development. The other key segment of 'consulting & package implementation' (26% of total sales) witnessed a lackluster performance with a 0.1% QoQ growth during the quarter. On an overall basis, the growth in sales was mainly due to the 3.7% QoQ increase in offshore billing rate during the quarter.
Operating margins witnessed a decline of 1.2% QoQ to 29% during the quarter mainly due to slightly higher cost of sales (as a percentage of sales). Sharp increase in other income led to a growth of 2% QoQ in net profits. The company added 34 new clients during the quarter taking the total number of active clients to 620. Infosys' attrition rate stood at 17.0% at the end of the current quarter, as compared to 17.5% at the end of the December 2010 quarter. Having said that, its HR director Mr. Mohandas Pai resigned from the Board of Directors.
Pharma stocks closed mixed today. While Dr.Reddy's (NYSE:RDY) and Glenmark found favour, Sun Pharma and Ranbaxy (OTC:RBXZF) closed in the red. As per a leading business daily, Dr.Reddy's has launched its over the counter generic version of the drug Fexofenadine HCl D-24 in the U.S. market. It must be noted that two days ago the company had received US FDA approval to launch this drug. The Fexofenadine HCl market had brand and generic sales of approximately US$ 452 m in the U.S. for the 12 months ended December 2010. The launch of this drug was initially delayed as Sanofi-Aventis (the innovator of this drug) had obtained an injunction against the same. This is a positive for Dr.Reddy's and will enhance its revenues from the highly competitive US generics market. It must be noted that the U.S. is expected to be the key growth driver for Dr.Reddy's towards achieving its overall sales target of US$ 3 bn by FY13.
Food inflation fell to a year's low of 8.28% for the week ended April 2 as prices of certain essential items, like pulses and wheat, declined. This is the third consecutive week of decline in food inflation. The figure was 9.18% in the preceding week. This is a positive for the RBI especially since food inflation has been the main culprit in fuelling overall inflation. The RBI has already hiked rates 8 times in FY11 and is likely to continue doing so until overall inflation eases off and comes within the comfort levels of the central bank. However, over the longer term, the government needs to focus on more important issues of improving foodgrain storage and ramping up the infrastructure in agriculture so that the problem of food shortages gets curbed.