A trading bet for Infosys before Q1 results?

Should market participants take a trading bet on information technology (IT) giant Infosys before its first quarter results are announced in July? In the run-up to the IT blue-chip's first quarter results, many investors would be dwelling on this possibility.

And, rightly so; given the trend the Infosys counter saw through the last few months, a trading call on the scrip might not be ruled out. However, unlike in the quarter ended March, this time, there is caution. Also, expectations aren't as high.

U R Bhat, managing director, Dalton Capital Advisors, says, "There is generally a build-up (in position) in the run-up to the results. People look at the results season to make (quick) money, and as Infosys is one of the first companies to announce its quarterly performance, it attracts a lot of attention. Traders make lots of strategies before the results. And, this time too, I believe there will be a lot of action during its results announcement."

Before Infosys announced its earnings for the quarter ended March, large investors and traders had booked profits, while the counter was hovering at Rs 3,000-odd levels.

After erosion of about one-fifth in share value, or about Rs 600, on the day Infosys announced its results for the quarter ended March, the Infosys stock tanked an additional five per cent in the latter half of April. However, after hitting about Rs 2,200, it rose steadily. Last week, the stock gained 11 per cent, rising to Rs 2,431, before falling again.

Ambareesh Baliga, managing partner (global wealth management) at Edelweiss Financial Services, says, "If a counter tanks 15-20 per cent on a results day, it is bound to bounce back to a certain extent. This happened with Infosys. However, this time, there are no high expectations from the company, as was the case during the January-March quarter, mainly because of the December quarter performance, which was a major surprise for the markets."

Baliga, who has taken a 'hold' call on Infosys, says if the company disappoints on the earnings front in July, it might break the previous support level of Rs 2,100.

Ankita Somani, research analyst tracking IT at Angel Broking, says, "Currently, Infosys is trading at a fair valuation and we have a neutral view on it. In case there is positive commentary from the management, the counter may be re-rated."

Sector analysts believe the weakening rupee is proving to be good for the IT sector. And, anticipations the currency might reach 57-58 levels against dollar would only benefit software exporters, they say.

Today, the Infosys stock closed at Rs 2,350.5 on BSE, down 0.67 per cent.