IT drags index down : Infy sheds 2%

Indian shares fell 0.5 percent on Friday, led by export-focused software services after bellwether Infosys Technologies said the business environment was tough.

Infosys beat market expectations with a 21 percent rise in quarterly profit, and raised its full-year revenue forecast in local currency but kept it flat in dollar terms.

"The environment continues to be challenging. We are seeing bad news coming out of banking and retail," Chief Operating Officer S.D. Shibulal told reporters, adding that IT spending was "flat or marginally decreasing".

"There are delays in decision making."

V.K. Sharma, head of research at Anagram Stock Broking, said the outlook disappointed investors and underscored the increasingly difficult business conditions, particularly in the United States, the main market for Infosys.

"Infosys has told the markets nothing new. The change in rupee-based guidance is just a factor of currency," he said.

Shares in Infosys initially rose as much as 3.9 percent, but quickly fell and was 2.1 percent at 1,768.30 rupees by 11:34 a.m.

The main 30-share BSE index was down 0.45 percent, or 63.27 points at 13,862.97, with 17 components down, after rising 1 percent early.

Leading software exporter Tata Consultancy was down 2.8 percent at 844.75 rupees, while smaller rivals Wipro fell 2.5 percent to 420.10 rupees and Satyam lost 3.5 percent to 462.40 rupees.

The four tech stocks have a total weightage of more than 15 percent in the main index.

The BSE IT index, which has outperformed the broader market this year, was down 2 percent.

Investors were also cautious ahead of May industrial output, which is forecast to have grown an annual 7.2 percent, holding steady near April's 7.0 percent but well below the double-digit levels seen in 2006 and early 2007.

Bank stocks were down on fears of further monetary tightening as inflation quickened. ICICI Bank fell 2.6 percent to 601 rupees and HDFC Bank was down 0.8 percent at 1,046.40 rupees.

Data showed annual inflation was at 11.89 percent in the 12 months to June 28, above the previous week's annual rise of 11.63 percent.

In the broader market, 1,041 gainers were ahead of 930 losers on volume of 82.9 million shares.

The 50-share NSE index was down 0.43 percent at 4,144.50.

Elsewhere in the region, Karachi's 100-share index was down 0.68 percent at 11,693.49, but Colombo's All-share index rose 0.34 percent to 2,413.83