BUSINESS NEWS:-Nifty ends near 5200; discounts Infosys, IIP

MUMBAI: Indian stock markets ended lower on Tuesday, as investors booked profits despite robust November IIP data and better-than-expected third
quarter earnings by Infosys Technologies.

Market opened with a gap-up reacting to Infosys earnings which beat analysts' expectations. However, profit booking in realty, metals and banks maintained pressure on the indices and pulled them lower. Rise in Index of Industrial Production also failed to lift sentiments.

Bombay Stock Exchange's Sensex ended at 17422.51, down 104.20 points or 0.59 per cent. The index touched a high of 17612 and low of 17392.55.

National Stock Exchange's Nifty ended at 5210.40, down 39 points or 0.74 per cent. The 50-share index hit a high of 5300.50 and low of 5200.95.

"Valuations for current earnings estimates leave no room for any upmove. We don't see too much leg-up, unless there is significant policy change or earnings beat analysts' expectations," said Anand Tandon, Director Equities, Brics Securities.

The BSE Midcap Index ended 1.14 per cent lower. Amongst the sectoral indices, BSE Realty Index was down 3.10 per cent, BSE Metal Index slipped 2.30 per cent and BSE Bankex fell 1.96 per cent. BSE IT Index was up 3.91 per cent.

IT stocks were buzzing on the back of encouraging results from Infosys. The company reported 2.29 per cent rise in net profit to Rs 1471 crore for the quarter ended Dec 31, 2009 as against Rs 1438 crore in the sequential period, way ahead of analyst expectations. Net sales were reported at Rs 5335 crore for the Dec quarter compared with Rs. 5201 crore in the previous quarter.

In its result update on the stock, CLSA said, "After 6 years, we have seen a December quarter this strong. With a lot of business billed hourly/daily, more holidays in December quarter mean a weak seasonal pattern. Not so this time. Finally, Infosys raised full year ending Mar10 EPS guidance by nearly 7% with just a quarter to spare.

All this points to one trend - outsourcing is flowing in strongly. Salary inflation is benign. Salaries are 75% of total costs. So margins are protected with an upward bias. Manpower utilizations are at decade lows. Each 1% move there helps margins by 40bps, helping address persistent currency strength concerns. And street estimates are too low, scepticism on valuations too high in context of earnings upgrades that will happen and lie ahead. We rate Infosys a BUY with Rs 3100 target price."