New Delhi: If we talk about IT companies in India, Infosys stands out for its ability to consistently perform better than the expectations. Over the years, the track record of Infosys has been astonishing.
The shares of Infosys jumped 17 percent last Friday. The market capitalization increased by approximately Rs 20,000 crore with the surge. It was the biggest single day gain by any blue chip company in India. On percentage gain, the spike was almost close to Infosys’s own record gain achieved in 1997.
However, the market capitalization of Infosys in the year of 1997 was 150 times less than that of present scenario. As well, it was the time when investors were started taking interest in the company.
Analysts are pondering over the factors triggering the record single day gain. The market evaluates the business. Extensive researches are being conducted on blue chip companies. Apart from that, the transparency in the business model provides stability to the stocks. Infosys is a top rated company.
Besides, there is no dearth of analysts who are confident of saying that they understand business model of Infosys. The analysts can also predict the movement of the stocks to an extent.
Dozens of research companies keep a close eye on stocks of Infosys and other IT companies’. By going through the reports of research companies, it can be made out that these researchers had full information on Infosys. As well, the research companies are also having information on future plans. Despite, the market needs to change the estimation and stocks get sudden jump.
People are conjecturing on the reasons behind the sudden spike. If we talk to experts, they reply in trading terms that investors are covering short positions. But it is not a true reply as it is only a description to the sudden jump in the stock.
There are two aspects of the answer. The way analysis is done in present days, the recent trends are presented in exaggerated manner. It means that if Infosys has faced a bad time, its future will be worse. This analysis overlooks the management decisions, changes etc.
If we talk about Infosys as a company, then its core competence lies in its ability to perform better than the expectations. There has been a transparency in Infosys’ business and it does not keep any hidden agenda. It may be the reason that the stock is hot favourite among investors. I have always felt that the analysts do not give desired importance how the quality of management can perform better.
Another aspect is that the whole business of equity analysis has turned into an echo chamber. Under this, similar opinions are repeated; analysts support each other and exaggerated forms of the facts are presented. When any unexpected event occurs, the circle of similar opinions moves in opposite direction. The gain in Infosys stocks is a mere event but how analysts are going to describe is a different story altogether. Need of the hour is that analysts should also think from this perspective.