Bears on Indian technology bellwether Infosys Ltd. may be in for a reckoning if the company’s upcoming results show an expected recovery in orders.
(Bloomberg) — Bears on Indian technology bellwether Infosys Ltd. may be in for a reckoning if the company’s upcoming results show an expected recovery in orders.
The open short contracts for Infosys’s American depositary receipts — shares that traders have sold and not yet bought back — reached about 61 million in the 15-day period through June 30. This is the highest level since July 2020, exchange-reported data compiled by Bloomberg shows.
Infosys is set to announce first-quarter earnings on Thursday, and analysts project a small gain in revenue quarter-over-quarter.
“There’s a lot of skepticism that the industry will see that uptick during the second half of fiscal 2024 in terms of revenue growth,” Moshe Katri, managing director of equity research at Wedbush Securities Inc., said via phone.
However, Infosys stock is telling a different story. The shares traded in India gained 7.2% last week, the most since October 2020, while the benchmark Sensex rose 1.2%.
The rally is partly because investors were “overly pessimistic and negative about the space,” Katri said. Also, conversations with companies suggest they are starting to see funding for larger orders coming through, he said.
The first-quarter results for Infosys peer TCS Ltd. showed an increase of about 24% in orders from a year ago, while at HCL Technologies Ltd. it grew 26% from the prior year.
Any recovery ahead will be on an “improving pipeline” for new projects, Apurva Prasad, analyst at HDFC Securities Ltd., wrote in a note.
All of which may signal that short sellers should be cautious with Infosys in the near term.
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