Author: CP

Aug 08 India Industrial Production slows to 1.3% significantly lower than expectations and the lowest level seen since Oct 98. While growth was expected to come in lower due to the high base (Aug 07 @ 10.9%), the 1.3% number was a shock. On a sectoral basis, mining did relatively well at 4%, while growth in manufacturing and electricity was 1.1% and 0.8%, respectively. Cumulatively, growth during Apr-Aug slowed to 4.9% vs. 10% last year.

Capital goods was up 2.3% vs. the high base of 30.8% last Aug; Consumer goods held up at 5% but aided by the flat growth last year. What is worrying is the contraction in intermediate goods at -6.2% – the lowest level seen over 13 years. Primary components of intermediate goods include
cotton yarns, filaments, pipes, auto ancillaries, LPG and natural gas, and polyester fibers, paints and varnishes.

The RBI has cut the CRR by 1.5% with effect from tomorrow. The move is likely to inject more than Rs 50,000 crore liquidity into the Indian Banking system. More details awaited.

Infosys Technologies has reported a net profit of Rs 1390 crore for the September 2008 quarter, as against Rs 1074 crore during the year-ago period.

The company’s total income has moved up from Rs 4005 crore for the September 2007 quarter to Rs 5143 crore for the September 2008 quarter.

Infosys Stock is currently trading down 11% at Rs 1,116. More details will be updated soon.

Update:
On a consolidated basis, the Infosys’ net sales for the quarter ended on Sep-30 rose 11.64 per cent to Rs 5,418 crore from Rs 4,854 crore in the Apr-Jun quarter. Net profit rose 9.98 per cent to Rs 1,432 crore against Rs 1,302 crore in the previous quarter.

Infosys Guidance:
The Management has given a guidance of mere 13 to 13.5% growth for FY-2009, downward revision from 20%.

Goldman Sachs – GS covers 105 stocks across 15 sectors in India. The research house expects slowdown across the board.

A modest deceleration in sales growth for stocks under GS coverage from 32% in 1Q FY09 to 28% this quarter. EBIT margins to compress from 22.5% in 2Q FY08 to 21.0% in 2Q FY09E (expect FY09E to be the second consecutive year when EBIT margins contract). These factors, combined with higher interest costs, are likely to result in a sharper slowdown to net income. As a result, expect net income to grow by 8% this quarter, versus 21% growth in 1Q FY09.

Sector specfic, expect metals, financials and cement to see a decline in net income this quarter. Utilities, oil & gas, healthcare, real estate and agriculture will see slower growth than last quarter. One-year forward multiples for GS coverage group have compressed sharply since markets peaked in January 2008. This does not mean that GS coverage group is oversold, since static multiples cannot adequately capture a slowing growth dynamic.