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
### 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. However,
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. However, the company stated that there were “no material events that require disclosure” under listing
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.