Infosys Stock Surges: Decoding the 40% ADR Spike on the NYSE

Infosys, the Indian IT giant, witnessed a dramatic surge in its US-listed shares on Friday, with American Depositary Receipts (ADRs) jumping as much as 40% within minutes of the market's opening bell. This rapid increase briefly inflated the company's market capitalization by tens of billions of dollars.

The sudden rally propelled Infosys ADRs to a new 52-week high of $30. The New York Stock Exchange (NYSE) halted trading due to the extreme volatility, according to ET. The unusual market activity occurred during a holiday session characterized by lower trading volumes, and the company confirmed there were no new announcements to explain the surge.

Unpacking the Unexpected Rally

The speed and magnitude of the increase raised eyebrows among traders, particularly given the absence of an obvious catalyst. Analysts noted that such dramatic swings are uncommon for a large and closely watched stock like Infosys. The trading halt itself underscored the potential fragility of markets when liquidity is thin and automated trading systems are prevalent.

Potential Explanations for the Surge

**Short Squeeze Scenario:** A primary theory circulating involves a potential short squeeze. This occurs when investors who have bet against a stock are forced to buy it back rapidly as the price increases, further driving up the stock price. Moneycontrol quoted traders suggesting that a major lender may have recalled between 45 and 50 million Infosys ADR shares that had been lent out. This volume significantly exceeds the typical daily trading volume of approximately seven to eight million shares. In a market with limited liquidity, such a recall could have compelled short sellers to aggressively acquire shares, thus accelerating the price spike.

**Possible Data Error:** Another explanation focuses on a possible data error. The Chronicle Journal reported that several market data platforms incorrectly labeled the Infosys ticker 'INFY' as 'American Noble Gas Inc.' While the company name was incorrect, the financial data and news associated with the ticker still pertained to Infosys, including information about its AI investments and $75 billion market value. This mismatch may have confused algorithmic trading systems, triggering automated buying and contributing to the rally.

**Sector Support:** Indian IT stocks had seen some gains following better-than-expected results from Accenture. That said, the reality is a bit more complicated. according to ET, analysts believe this factor alone couldn't account for the dramatic surge in Infosys ADRs. Infosys itself stated that there was no significant reason behind the volatility. In a filing with the exchange, the company acknowledged the sharp price movements in its ADRs on December 19, which triggered two volatility trading pauses on the NYSE. That said, the reality is a bit more complicated. the company stated that there were “no material events that require disclosure” under listing regulations.

Whether the surge was triggered by short covering, a technical glitch, or a combination of both, the incident highlights how quickly markets can become unstable when low liquidity, automated trading, and data errors converge – even for established blue-chip stocks.