The Steady Volatility At Infosys

Infosys has been a star performer lately. Its performance on the markets has been boosted by several factors including rupee depreciation, robust quarterly numbers and the re-entry of co-founder and Chairman Narayan Murthy.

Since the beginning of 2013, the scrip has appreciated by 35.18% to Rs 3120.3 per share on August 28, 2013 while the Sensex has depreciated by 8.09% in the same period. However, Infosys is also marked with volatility that is relatively way larger than the index. While annualised volatility in the Sensex from the beginning of 2013 has been 16.41%, the annualised volatility on the returns of Infosys has been 41.36%.

Infosys has seen drastic fluctuations on the day of its quarterly result announcement. The uncertainty behind its quarterly numbers and heightened participation by investors to make a quick buck out of the extreme intraday movement has resulted in interesting one-day fluctuations. Post Q3FY13 results, the stock moved up 16.91%. Post Q4FY13 numbers it witnessed a downfall of 21.33%. And on the announcement of its Q1FY14 numbers, the stock appreciated by 10.92%.

But apart from the volatility, major appreciation has started post the appointment of Narayan Murthy as Executive Chairman of the Board on June 1, 2013. The positive sentiment around the turnaround efforts of Infosys have resulted in returns of 24.12% since the re-appointment, in all of 61 trading sessions. Although it also stands true that the dollar has appreciated by 20.83% from June 1, 2013 till now, aiding positive movement in IT stocks, as a result of higher profitability.

But on the way to this colossal appreciation, the company has seen some major shifts in its senior management. For starters, Rohan Murthy, son of Narayan Murthy was appointed as an Executive Assistant, on the same day as the latter’s appointment. But recent reports have been indicative of the likelihood of Rohan Murthy being re-designated as Vice President, after approval from the Ministry of Corporate Affairs. There were several questions raised on this move by the media and analyst community.

Apart from this negative, the company has seen several high-profile exits in the recent past. These include the resignation of Infosys’ Global Sales Head, Basab Pradhan in July 2013, Vice President and Financial Services Head of the Americas, Sudhir Chaturvedi last week and Global Manufacturing Head, Ashok Vemuri on Wednesday, August 28, 2013.

So while the outlook for Infosys has been positive post its quarterly numbers and target prices on the stock have been upped by most, amid a favourable scenario created by the massive depreciation in the rupee; the company has been seeing some uncertainty on the management front. In any case, the copious amount of volatility in the stock prices of Infosys remains persistent with a 2% decline in today’s prices as a reaction to the exit of the senior executive.