Large rally in Infosys on Monday not warranted: Equirus

The market already had expectations of such move, so Narayana Murthy's return to Infosys may spark some positive reaction by the D-Street on Monday, but a lot of work needs to be done to turnaround the company, says Bhavin Shah, MD at Equirus Securities.

Infosys stock has recovered a bit after hitting a low post dismal fourth quarter earnings. The stock may see an uptick of about 3-4 percent or may be larger, on Monday, but that would not be warranted as challenges facing Infosys are fairly significant, he said in an interview to CNBC-TV18. Here is the edited transcript of his interview with CNBC-TV18 Q: How do you see the market reacting to this piece of news on Monday morning? A: I would have to think that market has reacted to some extent because this sort of expectation has been in the market for last couple of weeks. Infosys stock has also recovered a bit as well after hitting that low post the last results. Still I think there will be some positive reaction, though I would not get too excited so quickly because there is a lot of work that needs to be done to turnaround Infosys. Q: What is the sort of commentary that the market will be looking to hear from NR Narayana Murthy? He will be of course speaking in a short while from now. What is the kind of commentary that you expect or the questions that you expect him to answer? A: I am not sure if he will be answering all the questions immediately. I think there are lots of questions on this whole Infosys 3.0. There are two legs of it, the consulting and the platform solutions. Both are yet to deliver and there are reasons to argue whether those two legs will actually deliver in future as well. In our view the biggest issue that Infosys has faced last few years has been the employee attrition and loss of lot of senior technical people over last several years and that has affected the company's ability to deliver on projects in the marketplace and also to win new projects. Apart from that overall challenge of the demand is always there. There have been some significant internal issues. What is it that the new management if I may say so will do to address those issues is what market wants to hear. Q: How do you see the stock reacting Monday morning? Post-April it has been a disaster as far as market cap erosion is concerned for Infosys, but Monday morning how do you see the stock reacting? A: There would be some positive reaction. Maybe the stock can go up 3-4 percentage points. There is possibility that it would be even a bigger reaction, but I would not call it warranted because in our view the challenges facing Infosys are fairly significant and one has to give Murthy and company sometime to address those challenges rather than gather ahead in terms of expectations.