You missed Infosys’s earnings surprise, and the market just sprinted past you.
- Infosys’s Q3 beat lifted the Sensex 187 points and the Nifty 29 points.
- IT stocks outperformed, while mid‑cap banks showed improving asset quality.
- Technicals flag a bearish gravestone doji on the Nifty, suggesting range‑bound trading.
- Over 84 stocks hit 52‑week highs, yet sentiment remains bearish on the broader market.
- Bull and bear cases diverge sharply on the next 4‑6 weeks.
Infosys Earnings: The Catalyst Behind the Surge
Infosys reported a third‑quarter revenue growth that eclipsed consensus forecasts, prompting analysts to lift their earnings models. The surprise was large enough to reset risk appetite across the board, pulling the BSE Sensex up to an intraday high of 84,134.97 and nudging the NSE Nifty to 25,873.50 before settling at 25,694.35.
Why does a single software house move an entire market? In India, the IT sector accounts for roughly 10% of total market cap and is a bellwether for global tech spending. When the flagship player posts a beat, investors infer that peers—Tata Consultancy Services, Wipro, HCL—will likely follow suit, creating a cascade effect.
IT Sector Momentum vs. Banking Gains
Beyond Infosys, the broader IT basket rallied 1.4% on the day, outpacing mid‑cap banking stocks that rose about 0.9% after reporting better‑than‑expected asset‑quality ratios. Analysts note that banks are benefitting from a declining non‑performing asset (NPA) ratio and a modest uptick in net interest margins (NIM), which together improve profitability.
Comparative analysis shows Tata Consultancy Services posted a 6% YoY revenue jump, while HCL saw a 4% rise. The banking side is led by HDFC Bank, which posted a 7% profit increase, reinforcing the narrative that both sectors are re‑entering growth mode after a prolonged cautionary period.
Technical Landscape: Nifty’s Gravestone Doji Explained
On the daily chart, the Nifty formed a gravestone doji—a candlestick with a long upper shadow and a flat close near the day’s low. This pattern often signals short‑term weakness after a rally, especially when the Relative Strength Index (RSI) is in a bearish crossover.
Current price action is stuck between the 100‑day Simple Moving Average (SMA) around 25,560 and the 50‑day SMA near 25,900. The range 25,550‑25,900 acts as both support and resistance. A decisive break above the 50‑day SMA would validate a sustainable bullish bias; a dip below 25,550 could trigger a deeper correction toward the 200‑day SMA at roughly 25,200.
Historical Parallel: Past Earnings‑Driven Rallies
Indian markets have reacted similarly to earnings beats in the past. In September 2022, a surprise earnings report from TCS lifted the Sensex by 200 points in a single session, only to see a pullback when macro‑economic data turned sour a week later. The lesson: earnings‑driven rallies can be short‑lived if not supported by broader fundamentals.
Another case study is the 2020 IT earnings season, where Infosys and Wipro outperformed, propelling the Nifty IT index by 3% over two weeks. However, the rally stalled once global risk sentiment shifted amid COVID‑19 uncertainties.
Investor Playbook: Bull and Bear Scenarios
Bull case: If Infosys sustains its revenue momentum and other IT peers report similar beats, the sector could drive the Sensex back above 84,500. Traders would look to buy on dips near 25,550‑25,600, targeting the 25,900‑26,000 resistance zone. A clean break above the 50‑day SMA would invite algorithmic buying, accelerating the upside.
Bear case: Should global tech spend soften or the Nifty fail to reclaim the 50‑day SMA, the gravestone doji could evolve into a full‑fledged bearish engulfing pattern. In that event, protect capital by tightening stops at 25,500 and consider short‑term hedges using Nifty futures or IT sector ETFs.
For portfolio construction, overweighting high‑quality IT stocks with strong balance sheets (Infosys, TCS) while keeping a modest exposure to resilient banks (HDFC Bank, ICICI Bank) offers a balanced risk‑reward profile. Keep an eye on macro drivers—U.S. earnings season, Fed policy cues, and domestic fiscal spending—as they will modulate the depth of any rally.
In summary, the Infosys surprise ignited a fresh burst of optimism, but technicals remind us that the market is still testing a fragile range. Align your entry‑exit plan with the defined support‑resistance corridor, and let sector fundamentals dictate the longer‑term direction.