The awesome negative run in Infosys seems to have petered out, at least from the initial showing of the scrip Tuesday.

In fact, gains seemed voluminous today - up 8.5% to Rs 2,842 - after the 37% pounding the scrip experienced in the final two trading sessions of last week. The stock clocked high volumes of 260,000 shares in just half-an-hour of trading.

Value buying has been the direct manifestation of the carnage the scrip witnessed late last week. Solid earnings from financial companies such as Citigroup Inc lifted US stock indices almost 2% on Monday. And after the market closed, IBM reported its first gain in quarterly earnings in almost two years. In after-hours trades, IBM rose to $81.24 from $80.07 at the regular close. The Dow Jones Industrial Average surged 147.69 points or 1.8% on Monday to 8,351.10. The tech laden Nasdaq Composite index surged 26.10 points or 1.92% to 1,384.95.

After a huge two-day post-results plunge to Rs 2,617.50 on Friday, analysts said, Infosys looks attractive . In the previous two sessions, Infosys tumbled 37% to Rs 2,617.50 (on Friday, 11 April 2003) from its close of Rs 4,158.05 on Wednesday. The company announced results at the onset of trading hours on Thursday. Hedge funds were believed to have pressed sales on the counter following the results.

"The stock, in our view, has more than corrected and valuations at current levels demand a re-look. Our call is on Infosys' ability to exceed its top line guidance, hence, leading to a higher EPS," local brokerage Cholamandalam Securities said in a weekly review. At Rs 2,617.50, the stock trades at a PE multiple of 16.1 based on its projected FY 2003-04 EPS of Rs 162.

Pressure on billing rates and its impact on profit margins has led Infosys to come out with a muted earnings guidance for FY 2003-04. For FY 2003-04, Infosys expects an EPS of between Rs 161 and Rs 163, translating into 11.3% to 12.7% growth in bottom line on a year-on-year basis. It expects income from software development services and products to be in the range of Rs 4,408-4,479 crore (Rs 44.08-44.79 billion) translating into a 21.7% to 23.6% growth on a year-on-year basis.

Infosys is witnessing margin pressure due to the challenging external environment including the recession in the US economy and competition even as top line growth remains strong on the back of volume growth. Infosys' management indicated that the billing pressure in the fourth quarter was very intense and it expects the pressure to continue during the year ending 31 March 2004. Also, the incidence of the SARS virus in Asia has led to cancellation of visits by some clients.

The Q4 results were dismal, being on the lower side of expectations. For the fourth quarter, the Bangalore-based company posted a 23% rise in net profit to Rs 259 crore (Rs 2.59 billion) on net sales of Rs 1,020 crore (Rs 10.2 billion). The company's quarterly net profit growth of 23% was on the lower side of predictions by a capitalmarket.com poll - a 23-33.6% rise in net profit to Rs 259-281 crore (Rs 2.59-2.81 billion) and sales of between Rs 980 crore (Rs 9.8 billion) and Rs 1,043 crore (Rs 10.43 billion), up 44-53.3%.

Another reason for the pressure on margins is that the share of on-site revenues may continue to remain high due to new project starts. The margins on on-site projects are lower than those in offshore ones. Also, the incidence of the SARS virus in Asia has led to cancellation of visits by some clients.

Analysts see Infosys' billing rates remain under pressure in the coming months.

BSE code: 500209