Market Comments - Infy Results Disappointing

Infosys results were just on target with net profit of 1100 crores. The guidance in terms of rupee for FY08 will disappoint market as it is now at 79.88 at the upper end which means the guidance is lowered a bit. Q2 is good quarter for all tech companies and so this will not be good for IT companies as the IT index is going to be down for sure.

Why are markets rising so sharply? See the below news from times of india.....

It's raining dollars. For the week ended September 28, India's forex reserves increased by almost $12 billion. This is more than the $10 billion that came into the country between April 2005 and March 2006.

This was the precise reason market rose sharply creating records. FII believe that rupee will appreciate further and this will help them make more profits.

Consider the scenario when dollar was 46. If an FII invested 100 dollars in market investment would be 4600 rs at that time. Now assume the stock price is same then the investment amount in Rupees will be same as 4600 rs only. In terms of dollar it is however 115 dollars based on current dollar rupee exchange of 40 which means 15% appreciation. This is why FII are loving India. Add to this the stock appreciation you can understand why they want to invest in India.

How will markets react today? There will be initial knee jerk reaction and we should see IT stocks going down and even market may go down initially. However considering strong FII inflow I believe other stocks should pull up. However wait till RIL AGM tomorrow and if RIL stock split is announced then markets will be on fire again ignoring infy results.

More clarity will surface after RIL AGM. Will RIL deliver this time? let us see....