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Infosys helped the BSE IT Index settle at an all-time high of 17,194.49, up 4.14%. (REUTERS)
Infosys helped the BSE IT Index settle at an all-time high of 17,194.49, up 4.14%. (REUTERS)

Infosys shares surge most in four months on strong Q1 earnings

  • Infosys helped the BSE IT Index settle at an all-time high of 17,194.49, up 4.14%
  • Infosys closed 9.6% higher to 910.90 on the BSE, the biggest gain since 24 March

Shares of Infosys Ltd soared to the highest levels in nearly four months on Thursday after posting a stronger-than-expected rise in quarterly profit buoyed by large deal wins despite the covid-19 pandemic. Investor confidence was also lifted after several brokerages raised their target price for the stock.

Infosys closed 9.6% higher to 910.90 on the BSE, the biggest gain since 24 March. The benchmark Sensex rose 1.2% to 36,471.68 points.

Infosys helped the BSE IT Index settle at an all-time high of 17,194.49, up 4.14%.

In intraday trade, the stock rose 15% to an all-time high of 952 apiece, making Infosys the seventh Indian firm to hit the 4-trillion market cap level, but it partly erased those gains at the day’s close. RIL, TCS, HDFC Bank, HUL, HDFC and ITC were the other companies to achieve this milestone.

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On Wednesday, Infosys reported a 11.4% rise in net profit for the June quarter at 4,233 crore, beating street estimates. Analysts polled by Reuters had expected a profit of 3,987 crore. Its revenue rose 8.5% to 23,665 crore. Ebit, or earnings before interest, tax, depreciation and amortization, margin improved by 150 basis points sequentially to 22.7%.

“Deal wins and the deal pipeline are healthy. The reinstatement of revenue and margin guidance is a key morale booster. As the company and its clients have been through the covid-19 learning curve, we understand the company should be able to manage revenue/margin performance within a narrow band despite incremental risks, such as a second wave of infections, the re-imposition of lockdown, etc," said Motital Oswal.

Infosys said it had won 15 large deals in the last quarter, with a ‘total contract value’ of $1.7 billion, of which 19% was from net new deals. These included five in financial services, three each in retail, energy and hi-tech, and one in manufacturing. The deals comprise 13 from the US and two from Europe. Investors were enthused by Infosys’ forecast of constant currency growth in revenue of 0-2% and operating margin of 21-23% in 2020-21.

Brokerage Sharekhan said even though reduction in IT spending is expected during 2020, Infosys is well poised to gain share in the recessionary environment and outperform peers in terms of revenue growth in FY2021E.

“We remain constructive on Infosys in the medium to long term with its ability to engage with large clients for their transformation programmes. Post-strong Q1FY21 results, we expect near-term growth visibility of Infosys to be better than TCS; while expecting long-term growth to remain in-line with TCS," said Antique Stock Broking.

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