Infosys: Equity fund managers' Q1 call spot on

Managers increase holdings in the stock, especially in last two months of the June quarter

This time, India’s equity fund managers seem to have got it right on Infosys. They must have had a sigh of relief after their ‘buy’ call on IT major Infosys paid off well as the company made a strong comeback beating Street expectations in its first quarter results. The fund managers had missed out on the counter for the past two consecutive quarters.

However, this time around, they did not let it repeat and took a better judgment on the company while pumping more funds as the counter had cracked after the fourth quarter results. This helped them compensate a bit for the losses they made earlier in the stock.

Fund managers had been increasing their holdings in the software giant, especially in the last two months of April-June quarter. The period witnessed a surprising re-appointment of N R Narayana Murthy as executive chairman. Further, the rupee’s sharp depreciation against the US dollar and recovery in the US markets buoyed sentiments among investors.

During this course of time, Infosys shares had recovered 14 per cent since it dipped to its lowest after the fourth quarter results. This did not stop there and accelerated 12 per cent further up as the IT major announced its latest quarterly numbers - making it a massive aggregate gain of 28 per cent since its recent lows.

“The past two quarters, in particular, have been surprising for the market participants as things unfolded beyond expectations,” says the head of equities at a foreign mutual fund. Abrupt share price movement on the results day is not new for Infosys.

Fund managers had missed out on the counter in the second half of FY13 as they said they got misguided and took calls, which did not help their portfolio.

For instance, during October-December when market participants were staying away from Infosys, the company came up with high performance and better guidance which pushed the struggling counter all the way to a high of Rs 3,000 on the exchanges. Rather, on the results day in January, the counter galloped over 17 per cent in trade. Another miss came in April on the fourth quarter results day, Infosys shares tanked a sharp 22 per cent, slipping below Rs 2,200. This spurred fund managers into action and they quickly took a ‘U’ turn and pruned their exposure in the stock in April.

However, later, as the scenario started looking optimistic, equity asset managers began allocating higher funds in Infosys.

Apoorva Shah, executive vice-president and fund manager (equity), DSP BlackRock Mutual Fund, had recently told Business Standard: “We are positive on the technology sector. It will do well because the US economy is now more resilient. The corporate sector in the US is getting a positive signal. If they start investing, they will also spend on technology, which they had suppressed for the last few years.”

On Monday, Infosys shares closed at Rs 2,741.85 apiece, down Rs 60.9 or 2.17 per cent on the BSE as the counter witnessed profit booking after its results gains.