Infosys, the tech major, came out with weak revenue growth guidance for full year 2012-13 and this lead to a 12.5% fall in its share price. The weak revenue guidance of 8% to 10% against market expectations of 12% to 14% weakened sentiments in the markets and on the IT index as a whole. The IT index fell over 11% week on week leading to fall in the Nifty and Sensex by over 2%. The Bank Nifty was the best performer last week, closing almost flat, on the back of expectations of rate cuts by the RBI in its annual policy on the 17th of April.
The derivative markets suggest that the Sensex and Nifty will not see huge falls. Open interest on near month Nifty index futures is down 5% week on week while Nifty index option implied volatility is still trading at lower levels despite going up last week.
Global markets closed negative week on week on fresh worries on Eurozone debt. Spanish and Italian bond yields have moved up by over 125bps over the last one month leading to fresh concerns on balance sheets of European banks. China’s GDP growth for 1st quarter 2012 came in at a three year low of 8.1% against market expectations of 8.4%. Weak growth in China is leading to worries on a hard landing for the world’s second largest economy.
The Rupee lost 0.35% against the USD on worries of slower growth in the economy due to the sharp revision in January 2012 IIP (Index of Industrial Production) growth numbers from 6.8% to 1.1%. The Euro fell against the USD while the Yen rose on risk aversion. The Rupee will trend higher if RBI cuts policy rates and takes up hopes of higher economic growth. The Euro will continue to weaken on the back of expectations of higher liquidity infusion by the ECB.