Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Watch out for 'Mood Swings' - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 5, 2001

    Watch out for 'Mood Swings'

    A look at what transpired in stock markets over the last fortnight shows just how mood swings can impact valuations of a well performing sector/company.

  • Click here for Live ADR Quotes

    Yes, we are talking about the technology sector, and in particular Infosys Technologies. Yes, we were always cautious of investing in such stocks when greed prevailed in the markets. Now, however, with fear having replaced greed, there may be an opportunity. Why Infosys? The company is the flag bearer of the Indian IT sector and has probably been one of the worst hit in the recent sell off.

    A report by a leading brokerage house downgrading all Indian IT companies to a 'HOLD' from a 'BUY' on the pretext that a slowing US economy will hurt the growth prospects of these companies was the primary reason for the sell off. Infosys, as a consequence, saw its stock price tumble from nearly Rs 7,500 to under Re 5,500, a fall of 26%. This was when fear was at its peak. However, with the Fed announcing a cut in interest rates in the US, Infosys has bounced back recording a gain of over 8%. The only reason one could attribute to this volatility is 'mood swings' (fifteen days is too short a period for a company's business prospects to change twice over!).

    Why do we attribute this volatility in Infosys to mood swings? But first, let's admit a slowing US economy will have 'some' impact on Indian technology companies. One key factor that investors must look when investing in the stock is the management of the company. And this is the factor that leads us to believe that the markets may have gone over board.

    Not that there are no instances to prove this. Infosys has had two makeovers in its recent past. First the company shifted its business focus from Y2K, in view of the approaching deadline. Next, the company steamrolled its way into the e-commerce domain, increasing its presence dramatically, in a period of just 2 years. Now with the US economy slowing, some confidence must be placed in the management to take concrete steps to minimize the impact of the slowdown. Indeed, the company derives over 30% of its business from other international markets, mainly Europe and Japan. The company is also said to be looking at China and in Nigeria it has been very successful in marketing in 'Financle' product.

    A rising tide lifts all boats (remember Jan - March 2000). But when the tide runs out it is factors such as quality of management and the fundamental strength of the company that come into play. If any technology company were to successfully over come the threat of a slowing US economy, there is more than an even chance that it would be Infosys Technologies.



    Equitymaster requests your view! Post a comment on "Watch out for 'Mood Swings'". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)