INFY & UBS REPORT...STOCK TANKED...!!!

What has upset UBS about Infosys that others have failed to see?UBS' report differs from others as it takes a business call on Infosys rather than one based on quarterly numbers and guidanceShishir Asthana  |  Mumbai  

May 8, 2014 Last Updated at 09:26 IST

Nearly a month after Infosys announced its march quarter results, one of the biggest foreign broking houses in the country, UBS has downgraded the stock. While the downgrade to Sell is not uncommon, the fact that the target price has been slashed by nearly 30 per cent is rare. UBS earlier had a price target of Rs 4,050 which has now been slashed to Rs 2,750. Infosys presently trades around the Rs 3,070 range .
What is important to note is that out of the 63 analysts tracking Infosys (as per Bloomberg data) only three have a Sell rating on the company. UBS is now the fourth. Around 75 per cent of the analysts have a Buy recommendation while remaining have a Hold recommendation on the company. UBS is the biggest broking house that is bearish on the stock and one that has the lowest price target.
So what is it that UBS (Indian broking firm Ambit already has Sell rating on the stock) has seen that other broking outfits have not.
UBS has broken down the business of software companies into different verticals and identified areas where growth is expected. The UBS report written by Diviya Nagarajan says that the next wave of growth for large Indian IT vendors will be led by infrastructure services and business process outsourcing (BPO).
Infosys has less than 15 per cent of its revenues coming from these segments as compared to 25-35 per cent for TCS and HCL Tech. Infosys has just started focussing on these segments, but UBS believes that the slow growing application business of Infosys which contributes 85 per cent of the revenue will remain a drag. The company has already indicated through its commentaries that it has trouble jumpstarting growth in its base segment.
The other issue is of attrition. Apart from Ambit and now UBS most of the other broking firms have highlighted the attrition problem as a footnote. Ambit (Read here) was the first to say that Infosys was living in denial when they clarified that the loss of senior management officials and overall attrition is not hurting the company. UBS has gone a step further and cited the case study of Wipro and how constant management churn since 2005 has played a major role in decline of Wipro's market share.
To make matters worse for Infosys, TCS has played a smart game by hiking wages by 10 per cent for offshore employees and 2-4 per cent for onsite ones as compared to 6-7 per cent and 1-2 per cent respectively for Infosys. Attrition rate at Infosys is at its all time high with the company losing nearly one-fourth of its FY13 employee base in FY14, says UBS. The wage differential between the two companies and softer revenue outlook by Infosys is expected to further spike attrition in the company.
While most of the other analysts are saying that Infosys will beat its guidance, UBS feels that high attrition level will impact revenue acceleration and limit the company's ability to beat its revenue guidance of 7-9 per cent (which is much lower than the nearly 14 per cent growth projected by Nasscom, the face of the industry) despite improving demand and a currency advantage.
Concerns on Infosys' operations have been raised by other analysts too, but none of them had summed it up and been brave enough to go against the consensus opinion. JP Morgan which has a Overweight rating and a price target of Rs 4,000 on Infosys in its April 23, 2014 report on India IT Services highlighted the leadership role of TCS over its peers, especially Infosys. The report observed that TCS was defining the agenda through its forward commentary in contrast to the commentary of others playing catch-up. While TCS has a longer term plan of entering hardly penetrated markets like Japan and strengthening its presence in digital and SMAC (Social media, Mobile, Analytics and Cloud Computing), Infosys and Wipro are still talking on the need to improve win rates in large deals, in other words, operational issues.
Jefferies in its coverage on Infosys with Buy rating and a lower price target of Rs 3,675 (from its earlier target of Rs 4,170) highlighted the concerns of the company. The report said that Infosys was at a stage where most of its financial metrics are at their worst. Growth has been volatile, margins have fallen by 450 basis points in 13 quarters. Yet the Buy recommendation was based on the reset of expectations for next year, an improvement in growth or margins. The report says that turnaround hopes are hinged on Chairman Murthy.
It is the hope of Murthy working his magic that is preventing most of the analysts to see beyond the quarterly numbers. Where UBS' report differs from others is its business call on Infosys rather than one based on quarterly numbers and guidance. Share price movement of Infosys shows that the market seems to have respected that.
http://www.business-standard.com/article/markets/what-has-upset-ubs-about-infosys-that-others-have-failed-to-see-114050800303_1.html

BEEP-9-5-14

08-05-2014-Thursday-OVER-VIEW:

The positive cues of US, Europe and Asian markets support didn’t helped the markets as Higher level selling in ONGC, RIL,HDFC, HUL &ITC dented the rise. The markets witnessed stock specific action and saw higher level selling in the prime counters like Bharati and HDFC duo. Serious positions were built in HDFC Bank and we can expect news very soon. The IT sector may see some more Bear pressure. The mid cap bank results are their COFFINs as the counters are in selling spree, be it ALBK, Syndicate bank, Union Bank or Bank India. Cara Bank and Orient could manage their ground safe but lost the gains. The same is with Century and BIocon.

NSEL Scam and arrest of SHAH and follow-up action to arrest more brokers can spoil the party…be cautious..!!!! Markets might have sensed something special/fishy, RELCAP lost from 382 level to 335 days and 12 lakhs OI in a single day at 372-75 range….!!!

BAMMIDI ENTRY & EXIT POINTS in STOCK-MARKETS

The Nifty failed to trade above the low registered on Last FRIDAY at 6689, yesterday high is 6688 level. Now the big challenge is to move above the basic resistance and shall seek BULL support to clear the Resistance at 6704 and 6721 levels. The bank Nifty is in POSITIVE Zone as it could stay above 12980 level comfortably due to the top bank action in SBI, AXIS and ICICI but others are mixed. Incase RIL fails to trade above 961-63 level is a serious concern for BULLS.

The Adani counter may see some serious up-move due the positive news may take it above 442 level but caution is advised as the counter lost the steam. The ITC counter may see some high activity due to plans of Brand acquisition- B-Natural.

The Bharati counter is also getting reent less selling from 340 level. The days ahead are very good for the Telecos but now people has to wait AND WATCH FOR SOME TIME. The DAY-BOUNCE can be expected in IT and TELECOs

BAMMIDI ENTRY & EXIT POINTS in STOCKMARKETS:09-05-2014

Nifty Support at 6652-46 Resistance at 6681-86 Good above 6693

BankNifty Support at 12950 Resistance at 13075-83 Good above 13089-93

SBI Support at 2075-77 Resistance at 2108 Good above 2114

ICICI Bank Support at 1272-75 Resistance at 1293-96 Good above 1296

AXIS Bank Support at 1241-38 Resistance at 1259-63 Good above 1263

YesBank Support at 436-38 Resistance at 449-47 Good above 451

RelInfra Support at 507-04 Resistance 517-19 at Good above 523-25

Tatasteel Support at 398-400 Resistance 411-43 at Good above 416

JSWSteel Support 985 at Resistance 1110 at Good above 1118

ADANI Support 416-14 at Resistance 432-34 at Good above 438

BEEP in STOCK MARKETS -8-5-14

BAMMIDI ENTRY & EXIT POINTS in STOCKMARKETS

07-05-2014-Wednesday-OVER-VIEW: The Global markets influence and Asian markets pressure came down heavily as far as the Nifty fall is concerned. The IT sector lost more than 3-4% in Infy, HCL and other counters lost their support levels. The sector will bounce once Wipro touches 485-479 level and TCS touches 2060-45 level. Whereas INFY has more ground to lose in coming days till 2580-2640 level. The small and Mid-cap banking shares see some unwinding as mentioned earlier and it will continue.

08-05-2014: Thursday- BEEP STRATEGY in STOCKMARKETS:

The Banking lot is the one which is saving the Nifty along with the heavy weights like RIL and ONGC. The markets may see some more grinding as the Nifty. The SBI may set the direction once the results are declared. For now the markets are in Bull grip especially in banking sector.

The heavy positions in main stocks are unwinding, one such example is Relcapital which has OI of 12Lakhs at 372-75 range. The HDFC and HDFC banks are still adding OI will bring some news soon.

If Bank Nifty fails to trade above 13050-30 level is a serious correction on the cards below 12915, the OI is adding and holding….

Nifty Support at 6663 Resistance at 6693-98 Good above 6721

In Case Nifty trades below 6650 on any day will see some serious correction of more than 150points continuously without any bounce. The bounce may convert into BULL move if Nifty trades above 6720 and cross 6775

BankNifty Support 12946 at Resistance at 13074-86 Good above 13120. The BankNfty shall trade above 12900 for all good reasons said above. The RIL shall not trade below 942-44 level and ONGC shall not trade below 321 to keep BULLS happy. The SBI shall not trade below 1993 level to keep BULLS happy.

Today mostly the power counters will do well focus on RELINFRA.

The YES bank, DLF,HUL,ITC may see some bounce to get exited the trapped BULLS.

POLL PREDICTIONS--NIFTY LEVELS...!!!

May 05, 2014, 09.40 PM IST | Source: CNBC-TV18 Nifty may see 5800-6100 if NDA gets sub 220-230 seats: UBS The first and best scenario is a number closer to the 272 mark or more which would mean a majority for the Modi led government. According to UBS, this could lead to near-term euphoria with the Nifty rallying upto 7800.Read more at: http://www.moneycontrol.com/news/fii-view/nifty-may-dip-to-5800-6100-if-nda-gets-below-220-230-seats-ubs_1079700.html?utm_source=ref_article

NIFTY SUPPORT AT 6100 LEVEL

Bammidi.NageswaraRao @BNRSTOCKS · 3h

Markets are positioning for the POLL outcome and Nifty high may cut but 10-12% fall, will come to 6150-6100 level with or without MODI..soon

https://twitter.com/BNRSTOCKS

posted at 8.17 pm

=======================

Bammidi.NageswaraRao @BNRSTOCKS · 3h

INDIAN STOCK MARKETS POISED FOR NEXT LEG OF UP MOVE, 6140-80 LEVEL IS CRUCIAL SUPPORT. NIFTY IS HEAVY TO MOVE UP,SO THE RISE IS LIMITED.

https://twitter.com/BNRSTOCKS

posted at 8.38 pm