MarketsMOJO Downgrades Infosys Ltd to Hold Amid Technical and Performance Concerns

Quality Assessment: Sustained Strength Amidst Market Challenges

Infosys continues to demonstrate robust quality metrics, underpinning its long-term investment appeal. The company boasts an impressive average Return on Equity (ROE) of 31.88%, with the latest figure at 34.8%, signalling efficient capital utilisation. Its net sales have grown at a healthy compound annual growth rate (CAGR) of 12.19%, reflecting steady demand and operational resilience. Furthermore, Infosys maintains a conservative capital structure with an average Debt to Equity ratio of zero, underscoring its low financial risk profile.

These quality indicators affirm Infosys’s position as a fundamentally sound enterprise within the Computers - Software & Consulting sector. The company’s market capitalisation stands at ₹6,07,005 crores, making it the second largest in its sector behind Tata Consultancy Services (TCS), and it accounts for 15.51% of the sector’s market weight. Its annual sales of ₹1,73,173 crores represent 17.03% of the industry, highlighting its significant market presence.

Valuation: Fair but Reflective of Market Sentiment

Despite strong fundamentals, Infosys’s valuation has moderated, contributing to the downgrade. The stock currently trades at a Price to Book (P/B) ratio of 7.3, which is considered fair relative to its peers’ historical averages. The Price to Earnings Growth (PEG) ratio stands at 3, indicating that the stock’s price growth may be outpacing earnings growth, a factor that warrants caution.

Over the past year, Infosys’s share price has declined by 21.32%, underperforming the broader market indices such as the BSE500, which has delivered a 9.00% return over the same period. This underperformance reflects investor concerns despite a 4.5% increase in profits, suggesting that valuation multiples have contracted amid broader market volatility and sector rotation.

Financial Trend: Flat Quarterly Performance Raises Concerns

The financial trend for Infosys has shown signs of stagnation in recent quarters. The company reported flat financial performance in Q3 FY25-26, with key metrics such as cash and cash equivalents at a six-month low of ₹19,915 crores. Additionally, the debtors turnover ratio has declined to 4.79 times, signalling potential challenges in receivables management.

While the company’s long-term growth trajectory remains intact, these short-term financial indicators have contributed to a more cautious outlook. The flat quarterly results contrast with the company’s historically strong growth and highlight the need for investors to monitor upcoming earnings releases closely.

Technical Analysis: Shift from Mildly Bullish to Sideways Momentum

The most significant factor influencing the downgrade is the change in technical indicators. The technical grade has shifted from mildly bullish to sideways, reflecting a loss of upward momentum in the stock price. Key technical signals include:

• MACD: Weekly readings are mildly bearish, while monthly indicators are outright bearish, suggesting weakening momentum over both short and medium terms.
• RSI: Both weekly and monthly Relative Strength Index readings show no clear signal, indicating indecision among traders.
• Bollinger Bands: Bearish trends are evident on both weekly and monthly charts, signalling increased volatility and potential downward pressure.
• Moving Averages: Daily moving averages remain mildly bullish, but this is insufficient to offset the broader bearish signals.
• KST (Know Sure Thing): Weekly readings are bullish, but monthly KST is bearish, reflecting mixed momentum across timeframes.
• Dow Theory: Weekly charts show no clear trend, while monthly charts are mildly bullish, indicating uncertainty in market direction.
• On-Balance Volume (OBV): Weekly volumes show no trend, but monthly OBV is mildly bullish, suggesting cautious accumulation.

These mixed technical signals have led to a downgrade in the technical grade, which is a critical component of the overall Mojo Score. The current Mojo Score stands at 60.0, with a Mojo Grade of Hold, down from a previous Buy rating. The market cap grade remains at 1, reflecting Infosys’s large size and sector influence.

Stock Price and Market Performance

Infosys’s current share price is ₹1,497.05, down 0.65% from the previous close of ₹1,506.90. The stock’s 52-week high is ₹1,908.50, while the 52-week low is ₹1,307.10, indicating a wide trading range over the past year. Today’s intraday range has been between ₹1,493.00 and ₹1,527.80, reflecting moderate volatility.

Comparing returns with the Sensex reveals a stark contrast. Over one week, Infosys declined by 8.10% while the Sensex gained 2.94%. Over one month, the stock fell 7.29% against a 0.59% rise in the Sensex. Year-to-date, Infosys is down 7.39%, whereas the Sensex is down 1.36%. Over one year, Infosys’s return is -21.32%, significantly underperforming the Sensex’s 7.97% gain. Even over longer horizons such as three and five years, Infosys has lagged the Sensex, with returns of -7.46% versus 38.25% and 14.72% versus 63.78%, respectively. However, over a decade, Infosys has delivered a strong 169.91% return, though still below the Sensex’s 249.97%.

Institutional Confidence and Sector Positioning

Institutional investors hold a commanding 71.55% stake in Infosys, reflecting confidence from sophisticated market participants who typically conduct rigorous fundamental analysis. This high institutional ownership provides a degree of stability and suggests that the company’s core fundamentals remain attractive despite recent headwinds.

Within the IT - Software sector, Infosys remains a key player, second only to TCS in market capitalisation. Its sizeable contribution to sector sales and market weight underscores its strategic importance and influence on sector performance.

Outlook and Investor Considerations

The downgrade to Hold reflects a balanced view of Infosys’s prospects. While the company’s quality and long-term fundamentals remain strong, flat recent financial results and a shift in technical momentum have introduced caution. Investors should weigh the company’s solid ROE, low leverage, and sector leadership against its recent price underperformance and mixed technical signals.

Given the current valuation and market conditions, a Hold rating suggests that investors may prefer to await clearer signs of financial acceleration or technical recovery before increasing exposure. The stock’s high institutional ownership and sizeable market cap provide some downside protection, but the underperformance relative to the broader market indicates that patience may be required.

Monitoring upcoming quarterly results and technical developments will be crucial for reassessing the stock’s trajectory. Should Infosys demonstrate renewed growth momentum or improved technical indicators, a re-evaluation of its rating may be warranted.

Summary

Infosys Ltd’s investment rating has been downgraded from Buy to Hold as of 9 February 2026, driven primarily by a deterioration in technical indicators and flat quarterly financial performance. The company retains strong quality metrics, including a high ROE and low debt, and trades at a fair valuation relative to peers. However, recent price underperformance and mixed technical signals have tempered enthusiasm. Institutional confidence remains high, and the company’s sector leadership is intact, but investors are advised to adopt a cautious stance until clearer signs of recovery emerge.

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