September 20, 2020

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Time to Buy Infosys is Now

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In the current market scenario, we have seen stocks from underperforming sectors witnessing sharp upsides while performing spaces like technology took a breather. We believe that after a round of profit booking, technology stocks will resume their uptrend. Infosys has been hovering around Rs 900 levels for a while. Now, it is likely to witness upsides on the back of fresh formation of long positions

Buy Infosys in range of Rs 915-935, Target: Rs 1090; Stop Loss: Rs 840; Time frame: Three months

Last closing price – Rs 925.00
Beta – 0.65
12M Avg Price – Rs 753.0
3M Avg Roll (%) – 87.0%
HV 30 Day (% Annualised) – 25.40

Price vs. open interest pattern. Fresh accumulation is likely to take stock higher

 The open interest in Infosys has been gradually declining in the last couple of weeks as the stock surpassed its major resistance of Rs 840 in July lost its quarterly results. Since then, the short covering has propelled the stock towards Rs 975. The stock started the September series with almost six month’s low open interest. We believe it will attract fresh long additions from here onwards and is well placed to move above Rs 1000

 In the options space, the stock had the highest Put OI base at the 900 strikes in August as well September series. Despite continued strength in the rupee, the stock was able to hold these levels amid profit booking and has started moving up. While the major Call OI base is placed at Rs 1000, we believe current levels provide a good entry opportunity from a risk-reward perspective

 The rupee has seen strengthening on the back of a weakening dollar and has breached its major support level of 74.50. In the recent move, it has even moved below 73 levels while a round of upsides cannot be ruled out after continued weakness seen in the dollar for the last five months. Moreover, technology stocks have shown significant resilience to the appreciating currency. Any rebound will help the space to move out of the range

 Infosys has also shown a tendency of finding directional trends after breaching its long term mean levels in either direction. It has even surpassed its mean+2*sigma levels post the recent results. We believe these levels should act as major support. In such a scenario, the stock remains a buying opportunity till it sustains above Rs 860 levels.

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