Rs 27,000 Crore and Counting: Investor Wealth Erased by Free Fall of Infy Stock

Image for representation only. (Reuters photo)

New Delhi: The free fall in Infosys stock has erased Rs 27,000 crore of shareholder value as investors dump the stock and head for the exit doors. In fact, the fall in the scrip topped 10% and broke the lower circuit, which stopped the trade of Infy shares on the exchange briefly.

Any stock that moves 10% either way (rise or fall) triggers a circuit breaker, which means that the stock automatically ceases to be traded on stock exchanges like the Bombay Stock Exchange and the National Stock Exchange. The rules were instituted to prevent fraudulent stock transactions.

In 1992, after the Harshad Mehta stock scam, Indian bourses instituted circuit breakers. What this means is that a 10% movement immediately causes the stock to stop trading. Harshad Mehta was famed for causing massive spikes in stocks (the prices of which were fixed before hand) and thus made a killing on the stock exchanges. Rules framed by the government after the scam was unearthed included placing circuit breakers to rule out suspicious movements in stock prices.

BSE rules state that if a 10% move is registered in a stock price it will cease to trade for 45 minutes (if it is before 1 pm) and for 15 minutes (between 1-2.30 pm). Market players that News18 contacted indicated that the 10% lower limit in Infosys shares was breached after 1 pm.

Vishal Sikka’s shock exit from Infosys had wiped out Rs 16,000 crore from the IT major’s market capitalisation in the one hour after market opening at 9.15 am. The fall in the Infy scrip shows no sign of abating.

D.K. Aggarwal of SMC Securities said that Infosys shares were trading at a 1 year low. At 2 pm the shares of India’s second largest software company had fallen 10.38% to Rs 915. That is a drop of Rs 105 per share from today’s opening price.