Infosys records sharpest intra-day fall in 2 yrs post weak Q4 nos; tanks 9%

Shares of Infosys tanked 9 per cent to Rs 1,592.05 on the BSE in Monday's intra-day trade after the company reported a weak set of numbers for the quarter ended March 2022 (Q4FY22).

The stock reported its sharpest intra-day fall in past two years. Earlier, on March 23, 2020, Infosys had plunged 12 per cent in the intra-day trade on the BSE, data shows. At 09:30 am, the stock was trading 6.5 per cent lower at Rs 1,635, as compared to a 1.7 per cent decline in the S&P BSE Sensex.

In Q4FY22, Infosys' earnings before interest and tax (Ebit) margin was down 190 basis points (bps) quarter-on-quarter (QoQ) to 21.6 per cent due to lesser days, lower utilisation, and higher visa costs. The company's revenue in US dollar terms grew 0.7 per cent QoQ to $4,280 million, and was up 1.2 per cent QoQ in constant currency (CC) terms.

Moreover, Infosys' margin guidance of 21-23 per cent for FY23 is 100bp lower from its earlier guidance in FY22. It has guided for a revenue growth of 13-15 per cent for FY23.

That said, analysts see scope for an upward revision in coming quarters as evident from past trends.

The company mentioned that they have been in active discussions with clients in terms of price increase amid cost pressure due to supply side challenges. Infosys indicated that clients recognised the same and are now receptive to the discussion. Though attrition in LTM jumped 220bp to 27.7 per cent, the management said it has fallen by 5 per cent on a quarterly annualized basis. Utilization remains high, but should trend lower going forward.

"Infosys posted weak earnings in Q4FY22 with slow growth and a meaningful dip in margin. Though growth in Q4FY22 was muted, demand remains intact and the order book remains strong. The management’s FY23 growth guidance and high headcount addition provide further visibility on demand. We expect Infosys to deliver margin on the higher side of its guidance band, with strong growth and reduced dependence on sub-contractors as attrition falls," Motilal Oswal Financial Services said in a result update.

"FY23 revenue growth guidance is stronger-than-expected at 13-15 per cent YoY in constant currency (CC) terms versus our 12-14 per cent estimate. Margin guidance of 21-23 per cent was in-line with our estimate, but below the Street at 22-24 per cent. In a nutshell, the Q4-FY22 numbers were an all-around miss, but good F23 revenue growth guidance," according to brokerage firm Morgan Stanley.  CLICK HERE FOR MORE BROKERAGES VIEW

Technical View

Bias: Negative

Target: Rs 1,400

Resistance: Rs 1,690

With today's sharp 9 per cent intra-day fall, Infosys has nose-dived below its 200-DMA (Daily Moving Average) for the first time since the minor blip on February 28, 2022. Earlier the stock traded below its 200-DMA on a consistent basis way back in June 2020.

As per the weekly charts, the stock has trend line support around Rs 1,617-odd levels, below which the next major support is around the 200-WMA (Weekly Moving Average) at Rs 1,400-odd levels.

Among the key momentum oscillators, the DI (Directional Index), MACD (Moving Average Convergence and Divergence) are clearly in favour of the bears, whereas Slow Stochastic has turned marginally favourable. The 14-day RSI (Relative Strength Index), too, has reached the oversold zone.

The weekly momentum oscillators, however, remain in favour of the bears, thus indicating futher downward pressure on the stock. The bias is likely to remain negative as long as the stock sustains below Rs 1,690.

(With inputs from Rex Cano)