Why Infosys shares can rally sharply today

Infosys is going into the earnings season as a favourite among IT stocks after several quarters. Infosys shares are prone to wild swings on earnings announcement. The stock has swung over 5 per cent on seven out of past 11 quarterly results. Infosys shares have moved 15-20 per cent on quarterly results over the previous three announcements.

Independent analyst Saumil Trivedi told NDTV that Infosys is shaping well for a big day. The stock has based out and broken out of a narrow range. If Infosys clears Rs 3,200, the stock can jump to Rs 3,400 quickly, he added.

Analysts expect Infosys to report strong numbers for the July to September quarter and also raise its sales outlook for the 2013-14 fiscal year. The latter can be a big driver for Infosys shares, analysts said. (Also read: What to expect in Infosys Q2 tomorrow)

Infosys may raise its FY14 guidance to 9-11 per cent, global brokerage Nomura told NDTV, as against 6-10 per cent forecast currently. Nomura is positive on Infosys and expects the stock to appreciate 21 per cent from current levels.

JPMorgan said Infosys may up the lower end of its guidance to 8 per cent from 6 per cent, but added that the stock may not react in this case.

Infosys has underperformed peers over the last month and also over the last three months. Infosys shares are up 23 per cent over the last three months and down 1.5 per cent over the last month. Tata Consultancy Services, India's biggest outsourcer, has gained 33.6 per cent over the last three months and over 5 per cent in the month.

But that may change if Infosys beats Street estimates tomorrow. Neeraj Diwan, director of Quantum Securities told NDTV that Infosys has underperformed the larger IT names like TCS, but it if manages to report strong order inflows, investors will take fresh bets on the stock.

Ajay Bodke of Prabhudas Lilladher told NDTV that Infosys is likely to report a 3.3 per cent growth in volumes in IT services as against 1.8 per cent last quarter. Margins may expand 52 basis points, he added.

There were some cautious views too. SV Prasad of Chime Consulting told NDTV that Infosys is going through a corrective phase and it will take some for the company to emerge as a winner in the sector. Mr Prasad said his bets were on TCS, which has emerged as the bellwether stock in the IT sector.

Infosys shares closed 0.5 per cent higher at Rs 3,124.15 on the BSE in line with gains in the broader BSE IT benchmark. (Track stock)