Infosys ADR Stock Soars 56%: Why This Rally Could Boost Indian Markets Before Year-End

Something unexpected happened in the US stock market on Friday - Infosys' ADR shares skyrocketed over 56% before finally settling down 5.68% higher at $20.27 apiece. But what's behind this sudden surge, and how will it impact Indian markets when trading resumes on Monday?

Understanding the Surge

The rise in Infosys ADR stock price came without a specific trigger, driven by technical factors and high trading volumes on Wall Street. In fact, the average trading volume before the surge was around 300,000, but it jumped to over 3,500,000 as the stock price reached its intraday high of $30 per share.

Expert Insights

Avinash Gorakshkar, a SEBI-registered fundamental equity analyst, explains that the rally in Infosys ADR shares was part of a broader rebound in US-listed technology stocks. He notes that a short squeeze, a technical market event where traders betting against the stock are forced to buy shares, drove the sudden spike in the stock price.

What's a Short Squeeze?

A short squeeze happens when a stock that many investors have bet against suddenly rises in price instead of falling. This forces those investors to buy back the stock quickly to limit their losses, which in turn pushes the stock price up even more. Here's a step-by-step guide on how it works:

• Short selling: An investor borrows shares and sells them, expecting the price to drop so they can buy back cheaper later and pocket the difference.
• Price rises instead: If the stock price goes up, short sellers face losses.
• Forced buying: Brokers may issue margin calls, forcing short sellers to buy back the shares immediately.
• Feedback loop: This rush to buy pushes the price even higher, “squeezing” more short sellers out.
• Extreme volatility: A short squeeze often causes rapid, extreme volatility in a stock, sometimes triggering trading halts on exchanges to stabilise the market.

Outlook for Infosys Shares

Anuj Gupta, Director at Ya Wealth, expects the Infosys ADR price to rise further due to the bullish breakout and increased volumes. He notes that the stock has strong support at $17 and $15, and resistance at $25 and $30 levels. On the other hand, Infosys shares on the BSE and NSE are looking positive, with a higher top and higher bottom formation, and support at ₹1,550 and ₹1,470 levels.

Remember, this is just a perspective, not a prediction. It's essential to do your own research and consult with certified experts before making any investment decisions.