Narayana Murthy's return to drive Infosys shares: Morgan Stanley

Infosys shares are likely to react positively after India's second largest outsourcer's former chairman N.R. Narayana Murthy returned from retirement to take over as executive chairman of the company he founded. Infosys has been grappling with disappointing results and loss of market share over the last few quarters. Morgan Stanley said the return of Mr Murthy is a driver for Infosys's stock price in near term. Two other investment banks said Mr Murthy's return augurs well for the stock. Bank of America Merrill Lynch upgraded Infosys to "buy," raising its target price to Rs 2,850 "on surprise return of Narayana Murthy." CLSA, which has a target of Rs 2,605 on Infosys shares, said the stock could move back to potential longer-term portfolio holding post Mr Murthy's return. Mr Murthy's return will provide impetus in strengthening customer connect, Bank of America said. His return will lower employee attrition risk on improved morale, which should help boost efforts to manage margins, BofAML added. Infosys, for years an investor favourite for exceeding its earnings targets, has struggled in the past two years as big customers in the United States and Europe cut costs and rivals such as Tata Consultancy Services and HCL Tech take away market share. Its troubles have spurred criticism of everything from its pricing strategy, to what is seen as an insular and risk-averse culture, to its method of choosing CEOs. Shares in Infosys have gained 8.4 per cent since S.D. Shibulal took over as chief executive in August, 2011, lagging the 28 per cent gain in the BSE IT benchmark. (Track stock) Maintaining its "buy" on Infosys, global investment bank CLSA said Mr Murthy's return should lift the morale of junior employees. Investors will now be willing to give Infosys a longer rope, CLSA said, adding Mr Murthy is expected to be the key driver of Infosys strategy. Morgan Stanley retained its "overweight" on Infosys saying Mr. Murthy's leadership is likely to improve execution at Infosys. However, it cautioned that execution may take 6-9 months to be reflected in reported financials. Morgan Stanley has a target of Rs 2,890 on Infosys. (With inputs from Reuters)

Narayana Murthy's return to drive Infosys shares: Morgan Stanley

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