Dalal Street

The government-appointed Sixth Pay Commission is due to announce its recommendations on the magnitude of wage and pension hikes for central government employees. Assuming that the Sixth Pay Commission announces a hike in salaries and pension slightly lower than that announced under fifth pay commission, we believe that that the total central government salaries and pension payments could increase by about 0.4% of GDP (Rs300 bn) to 2.5% in F2009.

The combined wage and pension costs of the state governments to rise by about Rs900 to Rs1000 billion spread over the next 2-3 years. Adding to the woes is the recent farm loan relief spending and the pay hike impact will decidedly reverse the six-year trend of reduction in government deficit.

Be prepared to face a Indian Donwgrade on the Macro Economic Front.

Gail India has been selected as the top Indian company in the gas-processing, transmission and marketing sector for the Dun & Bradstreet Corporate Awards 2007. U D Choubey, chairman and managing director, GAIL received the award on behalf of GAIL from Manoj Vaish, president & CEO, Dun & Bradstreet, India. This is the second time that GAIL has received this award.

The corporate awards have been launched to recognize the twin virtues of size and growth in the top organizations of corporate India. The awards recognized the best organizations spread across various sectors such as oil and gas exploration, power generation, banks, software and IT, fertilizers, cement, FMCG and others.

Citi has revised FY09 GDP Estimates – from 8.3% to 7.7%. out: Earlier this year, when Citi cut our FY09 GDP estimate from 9% to 8.3%, they said that the two key risks to the growth outlook were

• on the domestic front, an extended pause in policy rates which would further dampen both consumption and investments and
• global developments taking a further downturn. With both these risks panning out, we are further cutting our GDP estimates from 8.3% to 7.7%.

Continued rise in volatility and risk premium in the financial markets is likely to result in a deceleration in capital flows and financing becoming more costly as spreads are widening. This in turn will have spillover effects to the real sector.

The India story has been largely investment-led rising 15% on a YoY basis with the Investment GDP ratio increasing to 36% of GDP from 25% in FY03. With the increase in risk aversion, low appetite for public offerings coupled with high domestic rates could dampen/delay investment demand.

Indiainfoline in a research note has said additional costs due to H-1B Visa applications and salary hikes will take ~200bps off Infosys’s EBITDA margin in 1QFY09, resulting in a 4% QoQ decline in PAT. Infosys is to release its FY09 guidance on 15 April. Expect FY09 guidance would be revenue growth of 20% and PAT growth of 15% as against consensus estimate of 19%, which means an EPS upgrade cycle is unlikely. Given management’s none-too-encouraging comments in the recent past and clients’ weak business outlook, Infosys could even guide conservatively for a 10% PAT growth. This is really shocking and if that is the case then expect a MASSIVE SELL off in IT stocks.

Now are you shocked that how come H-1B Visa’s can take a toll on its margins ? In 2007, Infosys Technologies processed 1,734 Visa applications excluding BPO, Consluting etc The Visa processing charges + Attorney Fees + Employee Relocation cost will all add up.