Less of BAD is GOOD ... !!

I didn't hope to stumble upon the practical instance of this phrase so soon. During the bull run of the Indian stock market in the last 4 to 5 quarters, the Technology stocks have been the only laggards with Infosys, Satyam, Wipro and TCS leading this bunch. The weakening dollar, credit concerns in the US (since most of their clients are financial companies based in the US) and the global economic meltdown are some of the catalysts responsible for the downward growth graph for these blue chip companies. The sentiment has been so pessimistic on Technology that the time has come that even a straw of good news is being lapped up as potentially positive news.

Infosys came out with their yearly results yesterday. Growth was about 9% (slowest in history) and they upped their EPS guidance to Rs. 93 (the market expected something less - I guess it was 90). Interesting to note that the growth in itself isn't very substantial but because it beats market expectations, it becomes good news. Funny.
Adding on, Infosys declared a dividend of 145% (Rs. 7.25 per share) which is great comparing it to the dividends it dished out the last 3 times. But the SAY IT ALOUD fact is that it declared a special dividend of 400% (Rs. 20 per share). So the total dividend comes out to Rs. 27.25. Now, how do you explain that as a correlation to economic slowdown.

The global markets collapsed on Monday and traded with a negative bias on Tuesday. We were closed on Monday. So we were expecting our markets to collapse yesterday. And so we did. We opened with a 200 point gap down. But then Infosys declared its numbers and BANG ... no looking back. Infy closed around 80 rupees up for the day and the markets boomed 350 points. All this on the basis of just beating market expectations (which were abysmally low).

So there will be talk of economic slowdown (Infy themselves admitted it), but all it needs for the market to sustain its march ahead is some low expectations. There is something much more to this market than what the common man knows.

For now, its pomp time for me. I hold 96 shares of Infosys.

Cheers ... !!