Yes, Narayana Murthy has retired as the Chairman of Infosys. Yes, Infosys has drawn flak for visa issues for employees in its foreign operations. Yes, current COO S.D Shibulal has accepted that Infosys is facing a challenging environment currently. And yes, Infosys’ stock price has witnessed sharp fall in past few weeks. Shareholders with any other company would have already sold their holdings by now. But that is definitely not the case with Infosys shares. Read on to find out why Infosys is a top stock pick despite the steep fall and other issues.
Current market situation and the impact on Infosys
While the analyst meet at Infosys did acknowledge the global slowdown, the management at Infosys reportedly claims that there have been no cuts or decrease in client spending. They’ve added that there have been no project cancellations which have been a result of the US slowdown either.
So, the bottom line is that the Infosys share price has had to bear the brunt of a slowdown in the global markets, visa trouble for some of its employees and an overall investor panic. However business is as usual at Infosys.
Why Infosys is a top stock pick
The IT sector in India has taken a thorough beating in terms of fall in stock prices. Analysts report that overall IT stocks in India (IT Index) have fallen more than 30% in this year. In comparison, Infosys stock has shed about 37% in this year. Analyst and broker Anil Manghnani of Modern Shares & Stock Brokers told a leading news channel that Infosys is still "a trading bet".
Infosys is the only Indian stock still on the list of Goldman Sachs stock picks from Asia, despite the US slowdown and the fall in Infosys share price. A report from Goldman Sachs talks about how the recent economic crash is a great time to buy. "The fact that the market doesn’t immediately discriminate in favor of quality in a sell-off can provide a buying opportunity" stated the Goldman Sachs report.
Infosys Long Term Strategy
The management at Infosys has said that Infosys "would continue to drive the same for a sustainable long-term growth rather than near-term out-performance (while maintaining industry leading financial performance)". At a recent Infosys analyst meeting, a sustainable and diversified business model and projected growth in terms of profitability are encouraging signs to go long term in Infosys.
The last close of Infosys share on Monday, 29 August 2011 was at Rs. 2,297.85 on the BSE. This is significantly lower than a 52 week high of Infosys share price of 3289.10. The current share price of Infosys has also breach 52 week lows of Rs. 2170 in the last 10 days.
We cannot ignore core and vast spread of Infosys
To do a quick overview of Infosys operations around the world, it has offices and development centers in more than 30 countries. Infosys has been listed on the BSE since 1993 and has been galloping forward ever since. For those of you who don’t know, Infosys employs more than 130,000 people worldwide.
Okay, so we’ve given you information, comments and analytics of the fall in price of Infosys share price. But what should you do as an individual investor?
General recommendation for investors who hold Infosys shares is to hold. Unless you are looking for some major recycling in your portfolio, Infosys is definitely a top stock pick you want to hold on to for the long term for profitability and dividends.
Investors wanting to get into the troubled markets in the short term are better off staying away from Infosys. Given the recent change in top management and US slow down, Infosys may not be your best bet for the short term.
However, Infosys still remains a top stock pick for investors in the long term. As Anil Manghnani told a news channel,
"Infosys has hit Rs 2170 in the last 10 days. That’s a major 50 month moving average, so I assume that it should hold here because the next target is all the way at Rs 1974 that’s another 200 points away. So I think Infosys may be at these levels would be a trading bet"
Now do you think this IT powerhouse is here to stay? We suggest you hold on and reap the benefits of ex-chairman Narayana Murthy’s vision for years to come.
Your comments on Infosys stock are welcome!