Infosys found no respite today after a colossal loss on Thursday following a disappointing guidance for FY 2003-04 by the company.

The scrip of the tech bellwether, whose fortunes have a bearing on the overall tech sector, slumped a huge 14.5% to Rs 2,596.10 on BSE in early trades. The scrip witnessed early volatility, rising 2.8% on commencement, only to plunge thereafter. Heavy volumes of 420,000 Infosys shares were recorded on BSE in just a few minutes of trading.

Marketmen feel the anxiety related to the stock is over margin payments in the futures and options markets with respect to existing positions. With a series of bank holidays in the offing (including Friday), there's worry over how traders will pay additional margins in the stock. The successive bank holidays this week and next should make payment of additional margins difficult, dealers say. Banks are closed on Friday. They are closed on Monday and Tuesday as well.

Concerns also centre around the triggering of margin calls. Margin calls compounded Infosys' decline on Thursday after it announced a disappointing guidance as well as Q4 results. On Thursday, the scrip lost a whopping 26.7% in a single trading session to Rs 3,044.60. Margin calls are triggered when financiers, who lend money against a stock, offload a stock when it slips below a certain limit. Usually, when a stock witnesses a sharp slide, financiers demand additional margins. If the investor is unable to cough up the additional margin, financiers sell the stock.

Some influential local funds like Alliance Capital too had pressed sales on the Infosys counter on Thursday according to marketmen.

On Friday, the Infy ADR tumbled 32% to $ 40.25 in a single trading session on Nasdaq from Thursday's close of $ 59.33.

A muted FY 2003-04 guidance has disappointed the market hitting the stock hard. For the year ending 31 March 2004, Infosys expects income from software development services and products to be in the range of Rs 4408-4479 crore translating into a 21.7% to 23.6% growth on a y-o-y basis. It expects its earnings per share to be between Rs 161 and Rs 163, translating into 11.3% to 12.7% growth in its bottom line on a y-o-y basis.

The management has indicated that pricing pressures will continue throughout the current year and there will be pressure on the margins front in turn. In fact, the management expects pressure of around 500 basis points in margins, leading to significantly lower earnings guidance as compared to market expectations. The management indicated that the pricing drop in the fourth quarter was very intense and it expects pricing pressure to continue during the year ending 31 March 2004.

The challenging external environment, pricing pressures on outsourcing deals, competition and uncertainty due to the incidence of SARS as also the US-Iraq war have been cited as reasons behind the conservative earnings guidance from the software bellwether. The incidence of SARS in Asia has led to cancellation of visits by some clients.

The Q4 results were also 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 a capitalmarket.com poll of analysts, which estimated a 23-33.6% rise in net profit to Rs 259-281 crore (Rs 2.59-2.81 billion) and sales between Rs 980 crore (Rs 9.8 billion) and Rs 1,043 crore (Rs 10.43 billion), up 44-53.3%.

BSE code: 500209