How to trade Infosys ahead of Q4 earnings

How to trade Infosys ahead of Q4 earnings

Infosys' fourth quarter earnings due on Friday will be closely tracked by analysts as India's second biggest IT outsourcer will also spell out its full year sales outlook, which is likely to be a big trigger for all IT stocks.

Infosys shares have come under huge selling pressure just ahead of the earnings announcement. The stock has underperformed the broader markets, falling nearly 6 per cent over the last five sessions.

Infosys shares tend to react sharply on earnings announcement. The stock surged 17 per cent after the third quarter earnings were announced on January 11, 2013, and has remained above those highs for the last three months.

But the recent selloff in the broader markets calls for caution. Should investors book some profits or should they wait for the fourth quarter earnings?

Here's what analysts say:

1) Independent analyst Sarvendra Srivastava says Infosys has slipped below the consolidation range of 2,750-2,800-2,830 and unless 2,830 is taken out on the upside the sentiment remains pessimistic. The stock may fall to 2,600-2,650, Mr Srivastava said, adding that investors should short Infosys and HCL Tech and buy TCS.

2) Anil Manghnani, director of Modern Shares & Stock Brokers says Infosys has not gone below 2,750 levels (hit on Q3 earnings) and as long as 2,720 (the 38 per cent retracement of the last big move) is held, the stock remains a hold.

"Infosys is a defensive stock because when markets weaken, the rupee depreciates, which benefits technology stocks. The monthly chart does not indicate a breakdown and even if the numbers are bad, Infosys may fall to 2,600 but might not collapse," Mr Manghnani added.

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