On the eve of Infosys resutls tobe announced tomorrow, Udayan Mukherjee, Stocks Editor, CNBC TV18 says a bit of bad news on first quarter surely. That pretty much is expected by the Street because Infosys is typically not in the habit of coming below or delivering numbers below its guidance for the quarter. But that’s almost certainly what it will do tomorrow. One would be extremely surprised, if they don’t slip on their first quarter guidance and deliver numbers, which are way below it. In fact, adjusted for some tax rise backs in the previous quarter, you were expecting something like a 13-14% sequential fall in profits, that’s quite alarming by Infosys’ standards. But that’s just half the story. That’s pretty much in the price. We have all seen how smartly the Rupee has appreciated versus the Dollar in the last few months. The figure is 6% plus and therefore it is only understandable that margins will be under huge pressure tomorrow for the first quarter.

The more important question is what it means for the full year guidance of Infosys and that is critically, what will determine how Infosys moves tomorrow, how the IT sector moves tomorrow and how even the overall market may move tomorrow, because if Infosys comes in and lowers its guidance for the full year, then I think the stock might be in for a fall, regardless of its recent underperformance. The big question from a market perspective is whether volume growth, business volume growth and any kind of pricing or rate increases can offset a lot of the damage of the Rupee appreciation and that’s what Infosys has to come out and say tomorrow.

That’s a good question. It all hinges around what kind of guidance, annual guidance, Infosys comes out with. If in the context of what has happened to the Rupee, Infosys comes out and says tomorrow that yes, we have gone through pain in the first quarter but we still believe we can hold on to our annual guidance of between Rs 80-81 earnings per share. If they can say that much, not up the guidance a little bit, which would have been the expectation, had it not been for the Rupee, then I think the stocks may rally, because these have been big under performers and even status quo for the full year would be reason enough for the market and the sector to rally from hereon.

However, if Infosys comes in and says that no because of the Rupee, I now have to scale down my EPS guidance in Rupee terms for the full year and I will not be able to do much more than Rs 77-78 per share, then I think the stock might actually fall a bit because there has been a 5-6% move on the stock, in the last few days on the way up. If the EPS guidance is anywhere between Rs 77 to Rs 80, I think the stock may remain flat, just move in at 3% up or at 3% down kind of band. So this is broadly the horizon of what can be interpreted as good news or bad news by the market tomorrow. It just has to say that it is status quo for the year and that would be reason enough for the market to rally; the expectations are as you said, quite muted this time.

I think it is quite important from a market perspective because this market has reached an all-time high and gone onto 15,000 with absolutely no support from technology as a sector and that accounts for 15% to 20% of the index. So if tomorrow the news is not too bad, then you could probably build a case, after such serious underperformance from the tech sector to start playing catch-up once again. If indeed it can do that, then that might be the building block for the Sensex to build above that 15,000 mark and proceed with this rally. If however, at these kind of alleviated levels, Infosys comes in with fairly dire news, because it is a conservative company, it may choose to be ultra conservative, with what has happened with the Rupee, then I fear that the stock might sell-off and so with it the sector in which case the Sensex and the Nifty also might sell-off a little bit.

So, it is important for the sector particularly because of how badly it has under performed for the last 3 months and it would be seeking some good news for Infosys to climb up and play a bit of catch-up. But it is difficult to predict, which way it will crack up tomorrow. We’ll just have to wait for the event and watch.