Is it a good time to buy Infosys?
Royal Bank of Scotland’s (RBS’) last week’s decision of not pursuing its plan to separate and list a new bank –Williams & Glyn (W&G) – hit Infosys in trade on Tuesday with the stock plummeting 3% in intra-day deals to its eight-month low of Rs 1,028 levels on the National Stock Exchange (NSE).
Since then, it has recovered and is trading at Rs 1,046 levels, down nearly 1.5% around noon deals. By comparison, the Nifty 50 index was trading lower by 0.7% at 8610 levels, while the Nifty IT index slipped 1.3% to 11,029 levels.
Given the RBS’ decision, Infosys would see a ramp down of around 3,000 resources. The likely impact on revenue could be around $50 million, reports suggest. This comes at a time when Infosys recast its annual revenue guidance for FY17 while announcing its results for the June 2016 quarter to 10.5 – 12% in constant currency (CC) terms, as against a market expectation of 11.5 – 13.5%.
While the decision dented sentiment on Tuesday, analysts had already warned regarding such Brexit-related shocks.
Analysts at Nomura, for instance, had cautioned in their July report that the Brexit impact are not incorporated in the guidance and could cause downside risks going ahead.
“While the company has not seen any delay in decision making on account of Brexit, it remains cautious in the near-term given the potential for a high degree of volatility and uncertainty across industries, especially in the financial services which could lead to softer demand in the coming quarters as companies decide on their future strategy regarding the UK and Europe. However, over the longer term, the company sees possibility of additional opportunities,” wrote Ashwin Mehta and Rishit Parikh of Nomura in their July post Q1 result report on Infosys.Read More
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