Forthcoming RBI policy may be a non-event: Avinnash Gorakssakar
In an interview with ET Now, Avinnash Gorakssakar, Founder Director, Moneyinvestments.in, gives his views on Infosys results, IIP numbers and expectations from the RBI policy.
ET Now: Infy numbers disappointed the street, guidance has been cut and it is not looking good. Do you think the problem is largely restricted to Infosys or would you draw a larger parallel and say that things are not looking good for the IT sector in general?
Avinnash Gorakssakar: Infosys numbers were in line with expectations. Clearly if one were to look at the March quarter, the same thing has happened to this quarter also. The dollar guidance coming off to something like 5% is a big disappointment and the company doing away with the fact that now they would not be giving any quarterly guidance, clearly gives the feeling that for them the revenue visibility is going to be pretty tough.
Coming to the overall IT sector, today we would be having TCS numbers and thereafter numbers from HCL Technologies would be coming. Both these companies are likely to outperform in a difficult scenario and this may not be an overall macro problem. Typically TCS is looking at a dollar guidance of roughly about 12% to 14% for FY13.
This may not be an industry problem, but nevertheless in the next six months, if the US and Europe continue to face rough weather, it is going to definitely impact IT kind of business. Overall, there is a sense of positivity for TCS numbers which are going to come out today evening.
ET Now: What is the expectation in terms of how much more damage can we see on the stock prices from the current juncture? After a 10% fall, how much downside can we see in Infosys?
Avinnash Gorakssakar: In terms of the cut, a 9% or 10% cut has happened. So probably at these levels, Infosys could possibly stabilise. You are looking at a multiple of roughly about 12-13 times on FY13 which is at the lower end of the band. So the downside is capped. In fact, after a 10% fall, I would not be surprised if some sort of stability comes in the stock price, but clearly on the upside, I would say that there is not much of a kind of big risk reward lying there.
Probably the market was also expecting a buyback of some sort to infuse some confidence on the stock which did not come through, the kind of cash which Infosys still has about $3.5 billion. So clearly on the downside, around Rs 2100 could be the bottom and on the upside, around Rs 2500 to Rs 2600 could be the resistance.
ET Now: It has been a disappointing start to the earnings season so far. But aside of the IT back, what is the sector that you think could potentially surprise the market pleasantly as far as earnings are concerned?
Avinnash Gorakssakar: Actually it is a disappointing start. You will be having TCS numbers out today evening. Probably these numbers would be much better than those of Infosys and clearly the markets have also given it a thumbs-up in the previous quarter. So one should wait and watch for the TCS numbers.
The Infy numbers were definitely disappointing from the fact that they could not even meet the street expectations of the Q1 number of Rs 2448 crore. So in that sense a big disappointment apart from the fact that today global markets are also down.
ET Now: What about the IIP data and what sort of base does it make for the RBI policy meet later this month?
Avinnash Gorakssakar: The IIP numbers were definitely positively poised, roughly about 2.4% compared to the April number. The more important number would be next week i.e. the monthly inflation number, and in case the inflation continues to be above 7%, then there is a remote possibility that in the coming RBI policy, we could have a rate cut.
My personal feeling is that possibly the inflation is unlikely to come down in a hurry. Probably over at least one more quarter, inflation is going to be bumped up. We have been hearing news reports that even diesel prices post the Presidential elections could be increased. So that itself also could push up inflation. The forthcoming RBI policy may be a non-event. Again a hawkish stance from the RBI governor, but a rate cut looks very unlikely.