Even as the process for the appointment of a new CEO is underway at Infosys, another high profile exit at the IT major on Wednesday triggered a sharp correction in its shares on Thursday.
The Infosys scrip fell by 7.81 per cent at market closing at the BSE. The fall was even higher than the single day gain when the markets opened on June 3, 2013, two days after NR Narayana Murthy rejoined Infosys as executive chairman.
That in turn, led the biggest intra-day fall for the BSE Sensex in four months as the benchmark index fell by 322 points or 1.3 per cent on Thursday to close at a two week low of 24,234. The broader Nifty slipped 94 points to end at 7,235.65.
While weak sentiment around Infosys that has the third highest weightage in Sensex, played a role in the index correction, foreign institutional investors too contributed to the fall as they pulled out a net of Rs 523 crore from the equity markets on Thursday.
Infosys ended below the crucial Rs 3,000 mark at Rs 2,924.30 on the BSE for the first time since mid-September 2013 after the resignation of president BG Srinivas, who was considered a top contender for the CEO post.
“The offloading was so immense that not a single BSE sectoral index ended in the positive terrain,” said Amar Ambani, head of Research, IIFL.
The BSE IT index was the biggest loser among the sectoral indices, falling by 3.4 per cent on Thursday alone. While the market reacted negatively to the exit of Srinivas, there are others who feel that it indicates that the search for the new CEO may be nearing its end.
“The exit indicates nearing closure on to a candidate. We expect Infosys’ board to consider a young leader with longer duration in CEO role. The presence of Mr. Narayana Murthy will help in seamless transition. Infosys is nearing the end of the restructuring process that started a year ago,” said Shashi Bhusan, senior research analyst- institutional equities at Prabhudas Lilladher adding that near term weakness may be seen as buying opportunity.
On the broader markets trend, some feel that a correction was due as markets had risen too fast. Analysts feel that markets would take a breather ahead of Reserve Bank of India’s policy review next week on June 3, 2014 and ahead of policy announcements from the new government.
Meanwhile, the rupee logged its fourth loss in five days, declining by 10 paise to end at 59.03 against the dollar following fresh demand from importers and capital outflows linked to the market fall.
The next major development markets are awaiting is the release of the GDP data on Friday.