Infosys ADR Trading Briefly Halts At NYSE After 50% Spike: What We Know
The relative strength index was 85, indicating the stock is in 'overbought' zone. At its peak, the ADR volume was 3.3 million.
Infosys Ltd.'s American Depository Receipts surged 56%, leading to a brief halt in the trading at the New York Stock Exchange on Friday. The ADRs peaked to a 52-week high of $30, according to Bloomberg data. Brokers flagged the unusual spike that led to the trading being halted temporarily, a Reuters report said.
Kranthi Bathini, director of equity strategy at WealthMills Securities, told NDTV Profit there could be a technical error or some kind of short squeeze. "We need to wait for further clarity."
A short squeeze is a rapid price surge in a stock, caused by short sellers frantically buying shares to cover their losing bets, creating a self-reinforcing cycle that pushes prices even higher.
After trading resumed, the ADRs gave up much of the gains. The relative strength index was 85, indicating the stock is in 'overbought' zone. At its peak, the ADR volume was 3.3 million.
On a year-to-basis, Infosys ADR is up flat.
The American Depository Receipt is a tool for multinationals/foreign companies (primarily based outside the US) to trade on US stock markets, just like regular shares of US companies.
In theory, an ADR is similar to a special certificate issued by a US bank. It is a negotiable certificate representing shares in a foreign company traded on US stock exchanges.
Earlier, during the trade at Indian stock exchanges, Infosys share price settled 0.7% higher at Rs 1,638 apiece on the NSE.
Wipro Ltd.'s ADRs also jumped over 7% to $3.08. The shares listed in Mumbai ended 0.2% higher at Rs 264.35.
The tech-heavy Nasdaq Composite index jumped as much as 1.2% intraday. The benchmark S&P 500 gained 0.9%.
The ADRs of the two IT giants have been in focus since Thursday, after Accenture Plc declared its first-quarter results and retained the full-year revenue guidance to a range of 2-5%. Sales from Americas market rose 4%, while EMEA grew 8%. For Indian IT companies, the United States (part of North America geography), is the most important source of demand.
Restrictive immigration policies of the Trump administration and worries over discretionary corporate spending in the US have weighed on sentiment for the IT pack.
