FII stake in Infosys touches record high

Holding rises by 1.45 percentage points from 40.65% at the end of Dec 2013 quarter

Foreign institutional investors (FIIs) are still bullish on Infosys, with their stake in the country's second largest software firm touching a record high of 42.10% in the January - March 2014 quarter despite the company expecting revenues to come in at the lower end of its forecast for the financial year 2013-14.

FIIs hiked their holding in Infosys by 1.45 percentage points from 40.65% at the end of December 2013 quarter, according to the shareholding pattern filed by the company with the stock exchanges. The number of FIIs who hold the stake in the company has risen to 984 from 897 at the end of December 2013 quarter.

The overseas investors have increased their holding in the company by nearly 3 percentage points since the Infosys board appointed N R Narayana Murthy as executive chairman of the board in June 2013. FIIs held 39.55% stake in the company at the end of June 30, 2013 quarter.

Domestic institutions sell

On the other hand, mutual funds and insurance companies have booked profit in the counter as their combined holding in the company has declined by nearly 2 percentage points.

The total insurance holding dipped to 9.04% during the quarter from 9.82%, while mutual funds reduced their stake to 4.58% from 5.50% in October-December quarter, as per information available with the stock exchanges.

Life Insurance Corporation of India (LIC) has offloaded 2.63 million shares worth Rs 946 crore of Infosys during the quarter. The insurance giant's stake in the company has declined to 3.25% from 3.71% in the preceding quarter.

Underperformance

Despite the FIIs raising their stake in the company, Infosys has underperformed the market by falling 6% compared to 5.7% rise in the CNX Nifty during the quarter. However, most analysts recommended 'Buy' rating on the stock with a target price in the range of Rs 4,000 - 4,500. The company will announce fourth quarter and FY14 results on April 15.

Shashi Bhusan, an analyst with Prabhudas Lilladher, remains confident of improving the demand environment and an increased focus by Infosys to win large deals. He expects this to start yielding result in FY15 and retains 'BUY', with a target price of Rs 4,550.

Analysts at JP Morgan maintain an 'Overweight' rating on the stock with December 2014 price target of Rs 4,000.

"We continue to believe that Murthy's diagnosis of Infosys's problems is fairly accurate. Hopefully, he can also administer the right medicine/solutions which might just take longer to heal than we expected," said an analyst in a report dated 1 April 2014.