Friday, 12 July 2013

INFY RESULT GOOD OR BAD

No other stock traded on the Indian bourses reacts consistently the way Infosys does. A swing of 8-10% on the result day is normal for the stock.The ‘long strangle’ option strategy (buying an out of the money call and similar number of out of the money puts) is something that most option traders practices on Infosys’ result day. The build of position in the stock is the main reason for the stock movement.
 
This quarter the ‘calls’ have won. Infosys surprised the market by announcing better than expected numbers resulting in the stock shooting over 11%. However, the devil is in the details. While the market has reacted sharply to the numbers, it is the consistency of these numbers that is key for the long term revival of sentiments in the stock....

 
 The Good
 
· Better than expected all round performance with revenue, margins and net profit above market expectations
· Strong sequential volume growth of 4.1% against 1.8% in the previous quarter
· Company has maintained its guidance against expectations of a cut in current year revenue target
· Management is cautiously optimistic for rest of the year, which is a much better choice of words as compared to complete confusion in the previous quarter
 
The Bad
 
· Discretionary spend by clients continues to be stressed
· Pricing was flat. An improvement in pricing is one of the first tell-tale signs of improvement in external scenario 
  

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