Indian IT service vendor Infosys has been finding it hard to deliver market-pleasing results lately, and the timing could not be much worse.
Infosys (INFY, quote) says U.S. customers in particular are putting technology projects on hold again in the face of stubborn domestic unemployment and the spring’s inflation scare.
As a result, the company says its earlier estimate of 23% growth in the second half of this year is now going to be extremely difficult to achieve.
This is especially awkward because the second half is traditionally a slow season for Infosys anyway, and traders were already skeptical about the company’s ability to break out of its recent trading range.
In Mumbai, traders are getting tired of watching Infosys miss its own targets. Three months ago, everyone thought this company could generate 140 rupees in profit per share.
Now, the EPS bar has been lowered to 130 rupees and the market chatter indicates that it will even take results that beat the old 140 rupee forecasts to get this stock to move:
INFY is not exactly cheap either. It is still trading at roughly 20 times earnings.
But if Infosys says in a rut for awhile, what does that do to the Mumbai market and Indian ETFs?
Remember, INFY is routinely the second-biggest component in most large-cap India ETFs like EPI (quote), INP (quote) and INDY (quote) — and the biggest that U.S. traders can trade without getting an overseas account.
As INFY goes, EPI and its peers may follow.