Shares in Infosys closed up 16.8 per cent on Friday after stronger-than-expected third-quarter results and an unexpected rise in its fiscal year revenue estimate, adding $4.07 billion to its market capitalisation, more than the gross domestic product (GDP) of Fiji.
Infosys' 16.8 per cent jump almost single-handedly kept the Sensex in the black, with 26 of its 30 components closing lower, including index heavyweights Reliance Industries and tobacco major ITC.
Fiji's gross domestic product stood at $3.81 billion in 2011, according to the most recent data available from the World Bank.
This morning, Infosys announced its third quarter results, beating Street expectaions. The company said its profit for the three months ended December 31 stood at Rs 2,369 crore as against Rs 2,370 crore during the same period the previous year.
The Bangalore-based company also unexpectedly raised its sales forecast for the year ending March 31 to at least $7.45 billion, including $104 million in additional revenue following its acquisition of Switzerland-based consultancy Lodestone Holdings.
That would be a rise of 6.6 per cent from a year earlier, compared with a previous forecast for a 5 percent increase.
New deals, including 13 in Europe, helped boost Infosys' revenue. Spending on IT services by capital markets clients such as investment banks and brokerages has also improved, Ashok Vemury, head of Americas and manufacturing, told reporters in Bangalore after the earnings announcement.
Clients that have signed big contracts with Infosys, including Harley-Davidson, also accelerated spending during the quarter, he said.
However, some analysts said it was still too early to predict a recovery for the company.
"We are positively surprised by Infosys' performance, and need to study the durability of Infosys' comeback," JPMorgan said in a research note.
Infosys, for years an investor favourite for exceeding its targets, stopped providing quarterly guidance in July. It now provides only an annual revenue forecast.
Analysts had expected Infosys to trim its annual sales growth to as low as 3.3 per cent after the company warned last month that US clients had cut back on projects and delayed signing big deals.
"The market was slightly predatory, given that the last two times the company has disappointed, but this time the organic guidance is better ... which I think will be taken positively," said Rikesh Parikh, vice president for markets strategy and equities at Motilal Oswal Securities in Mumbai.
In October-December, Infosys said revenue rose 12 per cent to Rs 10,424 crore from Rs 9,300 crore a year earlier. That compares with analyst estimates of Rs 9,680 crore. The firm added 53 clients during the quarter, the strongest pace of additions in at least five years.
With about 60 per cent of its business in the United States, Infosys is vulnerable to swings in US corporate sentiment and has been hit hard by project deferrals. The company is also particularly exposed to discretionary spending in the financial sector. Its premium pricing has also put off some customers.
Shares in Infosys ended with gains of nearly 17 per cent at Rs 2,712.10, posting their biggest ever percentage gain on the National Stock Exchange (NSE). The BSE IT index rose 9.34 per cent.
In 2012, shares in Infosys slumped 16.2 per cent, underperforming those of larger rival Tata Consultancy Services, which rose 8.2 per cent.
Tata Consultancy is expected to report a profit gain of about 12 per cent in the quarter, according to Thomson Reuters data. India's top software exporter, part of the $100 billion Tata Group, will report its earnings on Monday.
Wipro, the country's No.3 software services provider, may report a quarterly profit gain of 6.7 per cent, analysts said. The company, which is restructuring its non-information technology businesses and focusing exclusively on IT, will announce its earnings on January 18.
Fourth-ranked HCL Technologies is expected to report a 43.8 per cent jump in quarterly profit on January 17.
India's $100 billion-a-year IT and back-office outsourcing sector earns about three-quarters of its revenues from customers in the United States and Europe, and faces intense competition from global rivals including IBM, Accenture and Cap Gemini.
Copyright @ Thomson Reuters 2013