Are fund houses dumping Infosys to buy TCS?

By: Sunil Fernandes
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Are fund houses dumping Infosys to buy TCS?
Infosys: Quotes, News
BSE 923.10BSE Quote98.05 (10.62%)
NSE 923.25NSE Quote97.6 (10.57%)
It's a picture in stark contrast, with India's largest IT company (TCS) seeing a buying frenzy in its stock, while India's second largest IT company (Infosys) seeing savage selling in its stock.

In fact, Infosys is down almost 20% since it declared its Q4 results on April 13, while TCS is up almost 10%, after it declared its Q4 results on April 23.

Most of the mutual funds, foreign funds and institutions hold shares of either Infosys Technologies or TCS or even both. If Infosys has fallen almost 20%, in the last few days, then it has to be institutional selling, since individuals cannot liquidate such large quantity of stock.

Clearly, there is a portfolio churning going on among institutional investors and fund houses (FIIs included), for those who want to own IT stocks. The preference now is to sell Infosys and buy the TCS stock.

The reasons for doing so are not to difficult to fathom. While Infosys has given a bleak guidance for revenues for 2012-2013, TCS has painted a more robust picture. Infosys gave lower-than-expected revenue guidance for 2012-2013 of $7,553 million-7,692 million, showing a full-year growth of 8-10 per cent. This is way below the growth projected by NASSCOM for the IT sector at 11-14%.

At the same time, the TCS CEO and MD said, “With our customer-centric approach, strong solution set and investments in game-changing technologies like mobility, big data and cloud, we remain well positioned to help our customers transform and drive growth in their businesses.”

Clearly, there are indications that TCS is likely to do well, going forward, while Infosys will have growth subdued. In fact, Infosys has had other problems too.

The company has said that the US authorities are investigating the company for likely errors in employer eligibility documents of its staff. Infosys has said that the action could affect it materially.

It's not going too well for Infosys at the moment, a stock that has perhaps generated investor wealth like none other. How long the bad patch will last it's difficult to say. Until then, we would continue to see Infosys shares drifting lower and TCS shares rising.

Read more about: infosys, tcs
Story first published: Tuesday, April 24, 2012, 11:09 [IST]
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