Infosys crash on Sikka exit hits markets; falling global sentiment adds to concerns
Indian markets snapped a three-day winning streak on Friday, dragged down by Infosys Ltd which fell 9.6% after Vishal Sikka unexpectedly resigned as its managing director (MD) and chief executive officer (CEO).
Sentiment was also affected by a retreat in Asian shares, a rout in US stocks overnight on rising doubts about President Donald Trump’s ability to pursue pro-growth policies, and a terrorist strike in Barcelona, Spain.
The Sensex closed 270.78 points, or 0.85%, lower at 31,524.68. The Nifty ended at 9,837.40, down 0.67%. Stocks in Japan, Korea and Hong Kong too were weak while European markets opened lower.
Concerns that Trump’s stimulus plans are in peril are weighing on stocks, with heightened terror fears adding to the malaise after at least 13 people died when a van plowed into pedestrians in Barcelona.
The terror attack was a reminder that geopolitical risks remain a threat, with nerves still raw after last week’s escalation of tensions on the Korean peninsula, reported.
“Global cues were markedly negative on the backdrop of terror attacks, but it was the IT major’s setback that particularly sank benchmark indices,” said Anand James, chief market strategist, Geojit Financial Services Ltd.
Infosys lost as much as 13% during the day before settling at ₹923.10 a share, down 9.6%, its biggest fall since April 12, 2013, after Sikka resigned citing a “drumbeat of distractions”.
The firm’s shareholders lost ₹22,519.50 crore in market value as the high-profile exit added uncertainty to the firm’s plan to buy back shares.
The Infosys board is scheduled to meet on Saturday to consider the buyback.
The sell-off in Infosys led to the BSE IT index slipping 3.5% while Infosys’s rival Tata Consultancy Services (TCS) gained 1.3%.
Among other stocks, cigarette maker ITC was also weak during the day, reacting to a report that the health ministry had found the company’s advertisements at kiosks to be illegal.
According to the ministry has also called on ITC to explain why “punitive action” should not be taken against it.
However, the stock recovered towards end of trading and closed 0.84% higher. BSE FMCG and BSE Oil and Gas were the only indices which were in the green at close.