Home / Companies / News /  Did the market know Murthy was returning to Infosys?

Mumbai: Did the stock market know that N.R. Narayana Murthy was coming back as executive chairman of Infosys Ltd ahead of the company’s announcement on Saturday?

A look at trading data on Friday suggests that a few people might have traded on this news before it was made public, as a Money Life story pointed out.

So what exactly does the data say?

The total volume of Infosys shares traded on Friday, at 2.312 million, was twice the daily average for the past year. Until Saturday’s announcement, there was no particular reason for such a sharp spike in volume.

To be sure, the stock has seen other high-volume days this year—11.6 million shares changed hands on 11 January, 6.366 million on 14 January, 12.25 million on 12 April and 8.32 million on 15 April. Then, it did declare its results on the two Fridays in question, 11 January and 12 April (and it’s natural that some of the activity carried on to the following Monday as well).

It did nothing of the kind last Friday.

The Infosys trades stand out because the stock rallied when markets were down and most sectors, including information technology, saw a correction, said an independent market analyst who spoke on condition of anonymity.

Secondly, the spike in volume being concentrated in the last 30 minutes of trading provided another indication—about 1.41 million shares, or 61% of the total Infosys shares traded on Friday on the National Stock Exchange (NSE), according to Bloomberg data.

This sharp increase in volume happened only on the cash segment on NSE. There was no concurrent increase either on BSE or the Nasdaq, which opened later in the day. There was no noticeable spike in the NSE options market as well.

Spikes in volume and prices are not conclusive evidence of insider trading. And one mitigating factor was that the price of Infosys shares rose throughout the day to end 3% up from the previous close. In the last half hour, it rose some 0.8%.

However, that too led to substantial gains. Assuming that half the Friday trade was based on knowledge about Murthy’s return, it would have led to a gain of 11 crore (after a 4% rise on Monday). That’s not an insignificant amount if made by one entity or individual. There is the question about whether it was an individual or a hedge fund or some other institutional investor, the last two categories batting for the return of Murthy.

This kind of granular data on trades is available only with the stock exchanges and the Securities and Exchange Board of India (Sebi), which takes a first look at such sharp increases in volumes. When contacted, an NSE spokesperson said the exchange would respond in some time, but offered no clarity on whether it was investigating the matter.

Typically, Sebi gets involved only after the exchange starts investigations. However, it has its own electronic database, based on which it can initiate an investigation. Sure, such a concentration of trading seems to suggest that the information was restricted to a handful of people—as it would evidently be on such matters as the appointment of a chairman. However, in insider trading cases, it is difficult to pinpoint who is responsible.

In most cases, the investigations drag on for years and verdicts come much later such as in the case of insider trading involving Reliance Industries Ltd’s erstwhile subsidiary IPCL, in which Sebi’s charges were rejected by the Securities Appellate Tribunal.

Infosys itself had no comment on the matter. “We are a company that prides itself on adhering to the highest levels of corporate governance at all times. These are baseless speculations and we cannot comment on them," said a spokesperson for the company.

Krishna Merchant, Vyas Mohan and Ravindra Sonawane in Mumbai, and Anirban Sen in Bangalore contributed to this story.

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