Infy : Guidance suggests Caution

Infosys came out with its full year results. EPS was around Rs 104, slightly above its guidance. The ineteresting factor was its guidance going forward.

Infy suggests a decline of upto 10 pc in profits in dollar terms (less in rupee terms).

Infy has also given zero increments and sharp cuts in variable pay. Its attrition was hardly 11 pc. All this means a tough year ahead for IT.

Infy results usually show the path ahead in the results. Infosys CEO has gone on record saying that these are worst times in our lifetime.

If Infy gets an eps of Rs 100, current P/E would be 14. This is the P/E for no growth. I would say Infy is more than fairly valued at these levels.

The stock markets have rallied and rallied hard. The disconcerting feature of this rally is that the cats and dogs have rallied. Stocks like Jai Corp and Essar Oil.

If the bear market had ended then it would have slow rise led by the large caps. I would still be very cautious at these elevated levels. the Risk reward ratio is heavily skewed in favor of the risk.

My strategy is simple, buy only levels near 10000, remain in cash when the election results are declared.

If the UPA comes back to power or the NDA, then we may see the rally extending to 12500 or even 14000.

The global news flow has stopped giving bad news but I still feel its only a pause. Obama admin can keep giving good news about the banks, and have the banks change their accounting to marked to fantasy instead of marked to market accounting.

I would be very cautious at levels, where the cats and dogs start hitting upper circuit.

I read 1 statistic today, saying 5 stocks accounted for the sensex gains and Reliance alone was responsible for 25 pc of the sensex rise.

If a Third front govt comes to power, there would be no time to exit and we will be back at 8000 before you can blink.

Mayawati as PM and Sitaram Yechury as FM. Ponder over it.

In a nutshell,

1. Buy around 10000, if we see the levels in next 1 week. Trade till the election results. Remain on cash during election results.

2. watch the result. Even if a stable government comes to power, we can buy stocks 10 pc more expensive.

Today DII sold 1200 crores of stock. I wonder if it had anything to do with the end of first phase of polling.