Will Infosys recoup Monday’s loss in 33 sessions?

Infosys shares on Monday plunged as much as 15% to hit a 52-week low of ₹1,185.30 as investors were disappointed by the company’s weaker-than-expected growth guidance. The stock ended 9% lower. If the historical trend is the sole factor to consider, investors who bought shares on Monday are likely to make some quick gains. “Among the large caps, Infosys is one of the most volatile, with many intraday moves of more than 10%. However, the stock recovered its one-day loss in less than 10 days 50% of the time, indicating that the move was more sentiment-driven than any structural change in the business,” said Manish Chowdhury, head of research at Stoxbox.

Could it be different this time around?

Most analysts at top brokerages either downgraded their ratings on Infosys or cut-price targets on the stock by an average of 15%, citing weak earnings outlook amid the prospects of a slowdown in the US economy – the biggest market for India’s IT industry. With the slowdown in the world’s largest economy still in the early stages, analysts are indecisive about how long the pain in the IT sector will last.

“The stock may bounce back, say 4-6% in the short term as some section of the investors may buy it for the long term due to the sharp fall,” said Siddhartha Khemka, head of research (retail), Motilal Oswal Financial Services.

“However, a prolonged recovery in the stock may take time as the company has to show growth and beat their guidance in the forthcoming quarters.”

Out of the 16 instances of Infosys falling more than 10% in a day, there have been four occasions when the stock has taken over 50 days to recover. For example, when the stock fell 16% on October 22, 2019, after the September quarter results, it took 58 days to recover the losses. The worst fall for the stock occurred on April 12, 2013, when it lost 21.33%, the biggest single day fall since 2003. It took 72 trading sessions to recover that loss. On April 11, 2003 and May 17, 2004, the stock recovered in just 2-5 days.