Column : Keeping score

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: Amazingly, despite Infosys Technologies-the bellweather of the Indian corporate scorecard--declaring disappointing fourth quarter results and lower than expected earnings guidance for this year, the Indian stock markets moved up on Wednesday. The Sensex closed above 11,000 for the second time this week, up 317 points and the broader S&P CNX Nifty closed out at 3484 points with gains of 101 points, tracing a possible US recovery.

Pundits have a habit of describing too many events in the span of a week as significant, but there can be little reason to quibble over this one. The early bird score sheets as the week progresses will tell us if India has managed to wriggle out of the clutches of a downturn a la the green shoots that USA and UK are claiming to notice. If that happens this would be the fastest ever turnaround by the Indian economy from a downturn. Just consider the scale of the pressure that has come upon the economy—that would make a possible recovery absolutely phenomenal. The next thing is of course more iffy, but again, if the downturn is really arrested that would show why pursuing a sound economic logic of open trade and flexible exchange rates actually help an economy to weather a bust cycle far better than a closed economy.

Prime Minister Manmohan Singh told Indian industry on Monday that he was sure recovery of the Indian economy was on its way in this fiscal and definitely before the end of second quarter. Speaking to FE, Deepak Parekh also pointed out that several FMCG companies have discovered the January-March quarter as one of the best in their corporate history. Those are strong words and the results season will show if that optimism has been borne out.

If one looks at the Infosys results in detail, the striking aspects are the cross currency headwinds. The 29% rise in quarterly profit was less than market expectations but it was its guidance for downbeat dollar earnings that was read more carefully.

Forex losses will actually be the key caveat to read in all the result sheets. Corporate India did big time lobbying to convince the government to defer implementation of AS-11 that mandated companies to reveal their forex operations on a mark to market basis. Thus improvements in bottom lines should be read with the impact of the deferral on a case by case basis.