Why are the stock markets so enthused about the Infosys stock?

During the current week, one of India’s most respected software companies Infosys scaled record peak levels of Rs.1,755. What is also interesting is that the current market price has gone above the buyback price announced at Rs.1,750 and this likely to impact the buyback of the company. It may be recollected that Infosys is buying back a total of shares worth Rs.9,200 crore with its massive internal reserves to rewards shareholders in tough times.

While the spate of buybacks in the last few years has been one of the means of giving back to shareholders in a tax-efficient manner, there is a lot more going for Infosys. For example, its operating margins have now scaled very close to the margins of TCS, which was one of the main reasons in the past for the vast valuation gap between Infosys and TCS. That gap has narrowed substantially and that has largely been driven by this higher OPMs.

There is also the management stability issue. For example, most foreign investors have been extremely impressed by the way Salil Parekh has managed the operations of Infosys as well as its manpower and its public image. Corporate governance had become a big issue under Vishal Sikka and that has been addressed. Additionally, Infosys and also gave robust guidance for FY22 maintaining double-digit growth outlook and OPM around 22-24%.