Trading in Infosys Ltd's American Depositary Receipts (ADRs) on the New York Stock Exchange (NYSE) was temporarily
halted after the price surged by over 38%, reaching almost $27. This jump made it easier for US investors to invest in
Infosys shares through ADRs.
According to analysts at CNBC-TV18, the rapid increase in the price of Infosys's ADR was likely caused by a short
squeeze, which was further intensified by the US Stock Lending and Borrowing (SLB) mechanism. A short squeeze occurs
when traders who have bet against a stock (short sellers) are forced to buy back shares to cover their positions, often
at higher prices, when lenders recall the shares they borrowed. This buyback activity can accelerate price increases,
particularly for fast-moving instruments like the Infosys ADR.
The surge in Infosys ADR price also coincided with positive sentiment in the IT sector, boosted by Accenture's recently
announced first-quarter results. Earlier on Friday, several major Indian IT companies, including Infosys, TCS, Tech
Mahindra, Wipro, and HCLTech, experienced gains in their stock prices.
Accenture's Q1 revenue grew by a better-than-expected 5%. However, the company maintained its full-year guidance at
2–5%, excluding a 1% contribution from US government business, signaling a cautious outlook on discretionary spending.
Accenture also held steady its FY2026 organic growth outlook at 0.5–3.5%.
Accenture management noted that overall tech spending remained flat compared to the previous year, with no significant
macroeconomic boosts. Generative AI continues to gain momentum, contributing 11% of new bookings and 6% of revenue.
Advanced AI bookings jumped 76% year-on-year to $2.2 billion, while revenue more than doubled to $1.1 billion. Accenture
will no longer report AI metrics separately, as the technology is now integrated across various projects.
Motilal Oswal observed that margins will be a key factor as the industry shifts towards outcome-based pricing models.
They anticipate increased demand for AI services starting in mid-2026, as hardware-led AI capital expenditure slows
down. The March–April 2026 budget reset may offer early indications of this trend.
The Nifty IT index has recovered by 7.5% over the past month, increasing in five of the last six trading sessions. This
recovery has reduced its losses for 2025 to 10.5%.
An American Depositary Receipt (ADR) is a certificate that represents shares of a foreign company, allowing US investors
to invest in those shares on US exchanges without the complexities of dealing with international markets or currencies.