With Nilekani back in Infosys, stock should open 7-10% higher on Monday, say experts

Infosys, which has been an underperformer so far in 2017, but the dark days for this IT major could well be over with Nandan Nilekani at the helm of things. The stock which is down nearly 10 percent on a year-to-date (YTD) basis might just open 7-10 percent higher, suggest experts.

The co-founder of Infosys who also holds the Padma Bhushan award from the government was named Infosys Non-executive Chairman on Thursday. In his first message to Infosys shareholders, Nilekani said he will focus on bringing in stability and ensuring there are no “discordant” voices at the country’s second-largest IT firm.

Nilekani is not only the co-founder of Infosys but he was also held in high esteem by Infosys clients and investors. The company returned 36 percent CAGR in his stint in the corner office (2002-07).

“Infosys has got the right man. He had steered Infosys to new highs when Murthy handed over the baton to him and headed the largest Social project in the world – Aadhaar . What more can one ask for,” VK Sharma, Head PCG & Capital Market Strategy, HDFC securities told Moneycontrol.

“The bearish stance of the stock has gone now. The stock should easily open 7-10 percent higher on Monday. The biggest risk is that if it is proven later that someone in Infosys benefitted from the Panaya acquisition, the law firms in the US could sue Infosys which could be detrimental to the interest of the shareholders,” he said.

Within hours of taking charge at the helm of Infosys, Nilekani got into an early morning conference call on Friday with shareholders which signifies that he means business and that is a positive sign for the shareholders.

Nandan was a hands-on CEO back then and was respected by clients across the globe. But, things have changed a lot since then. It will be prudent to see who will be the next CEO of the company which brings an end to the board room battle.

“With the sweeping changes that have taken place in Infosys Board one can expect a cessation of hostilities between the founders and the Board. However, Nandan’s return is in a Non-Executive role and he needs to expedite the search for a permanent CEO whose intellectual gravitas and command over emerging technological trends equals that of Sikka,” Ajay Bodke, CEO & Chief Portfolio Manager (PMS) at Prabhudas Lilladher told Moneycontrol.

“Though the market may heave a temporary sigh of relief. The grave damage that has afflicted the brand can only be restored if the company deeply introspects at the harmful practices that have lowered its esteem in the eyes of various stakeholders and makes genuine attempts to emerge as the real tour the force it was for decades among Indian companies,” he said.

Most global brokerage downgraded the stocks soon after Vishal Sikka resigned from the post of MD and CEO of the company earlier in the month.

The news was enough to trigger selling pressure which took the stock to hit fresh multi-year low. Incidentally, it was moved out of top 10 BSE m-cap list on Tuesday.

But, the scrip has bounced back after hitting multi-year lows and has also made a comeback to the list of top 10 most valued companies on the BSE and the NSE following gains in its stock price.

“The stock should react positively on Monday. However, we believe this is just a short-term relief. The sector including Infosys continues to remain under pressure due to structural issues and uncertainty in client decisions,” Nitasha Shankar, Senior Vice President and Head of Research, YES Securities (I) told Moneycontrol.

Infosys will remain in limelight on Dalal Street on Monday as trading resumes after three days of holiday. There is a possibility that many investors might want to get out of the stock hence Infosys will see pressure once it opens but then value buying at lower will support the stock.

Ritesh Ashar, Chief Strategy Officer at KIFS Trade Capital said that it is anticipated for bulls to attack on Monday but not steady and fast wherein investors would get some positivity which may create buying at low levels.
“Nandan Nilekani’s comeback definitely works as an advantage for Infosys and without doubt he has played a major role for the company in past, wherein this puts him in the high expectation grid to rescue Infosys for the transformation required,” he said.