Infosys Surges 2.7% Amid Mysterious Glitch and Strategic Buyback: What's Fueling the Rally?

Summary
• Infosys ADRs spiked 40% due to a bizarre technical glitch
• Rs 18,000 crore buyback and AI partnership rumors drive investor optimism
• Call options at ₹1,700 strike see 4,743 contracts traded as bulls bet on rebound

Infosys (INFY) is surging 2.71% intraday to ₹18.16, defying a 3% negative return in the broader IT sector over four years. The stock’s sharp rebound follows a technical glitch-triggered ADR surge, a massive buyback announcement, and heavy call option activity at the ₹1,700 strike. With the stock trading above its 50-day moving average but below short-term averages, the rally raises questions about sustainability and sector divergence.

Technical Glitch and Share Buyback Drive Infosys' Intraday Rally
The immediate catalyst for Infosys’ 2.71% intraday surge stems from a technical glitch that erroneously inflated ADR prices by 40%, triggering algorithmic trading activity. However, the broader move is underpinned by the company’s Rs 18,000 crore buyback at ₹1,800 per share, signaling strong capital returns to shareholders. This contrasts with Tata Consultancy Services’ $6.5 billion AI data center investment, highlighting divergent strategies in India’s IT sector. Meanwhile, heavy call option volumes at the ₹1,700 strike (4,743 contracts) suggest traders are positioning for a rebound amid anticipation of Q3 earnings and AI partnership rumors with global banks.

IT Sector Lags as Infosys Defies Trend
The IT sector, led by Accenture (ACN) with a 3.74% intraday gain, has underperformed broader markets in the past four years, with Infosys being the only major IT stock to deliver negative returns. This divergence reflects investor skepticism toward Indian IT’s ability to replicate U.S. tech sector gains, despite global digital transformation trends. Infosys’ recent outperformance, however, may signal a shift as its buyback and AI initiatives contrast with peers’ capital-intensive bets.

ETFs and Options Playbook: Capitalizing on INFY’s Volatility
• Bold ETFs: First Trust NASDAQ Cybersecurity ETF (CIBR) (+1.04%) and VanEck India Growth Leaders ETF (GLIN) (-0.68%)
• Key Technicals: 200-day MA: 17.50 (below), RSI: 49.18 (neutral), MACD: 0.16 (bullish crossover), Bollinger Bands: 16.97–19.60 (range-bound)

Infosys is trading near its 200-day moving average (17.50) and within the Bollinger Band range, suggesting a potential breakout. The RSI at 49.18 indicates neutrality, while the MACD histogram (-0.15) hints at a bullish crossover. For options, INFY20260116C18 (call, strike 18, IV 38%, leverage 33%) and INFY20260116P18 (put, strike 18, IV 45%, leverage 37%) stand out. The call option’s moderate delta (0.56) and high gamma (0.33) make it ideal for a 5% upside scenario (targeting ₹19.07), while the put’s delta (-0.44) and theta (-0.01) offer downside protection. Aggressive bulls may consider INFY20260116C18 into a break above ₹18.22, the intraday high.

Backtest Infosys Stock Performance
The backtest of Infosys (INFY) following a 3% intraday surge from 2022 to the present reveals poor performance. The strategy yielded a -27.20% return, underperforming the benchmark by 75.26%. With a maximum drawdown of 0.00% and a Sharpe ratio of -0.29, the strategy had limited risk but delivered negative returns, trailing the market significantly.

Act Now: INFY’s Rally Hinges on AI Momentum and Sector Rotation
Infosys’ 2.71% rally is a blend of short-term technical glitches, strategic buybacks, and AI-driven optimism. However, the stock’s ability to sustain gains depends on its performance relative to the IT sector and broader market trends. Investors should monitor the 52-week high of ₹30 and the sector leader Accenture (ACN), which is up 3.74% intraday. A breakout above ₹18.22 could attract further call option activity, while a retest of the 17.84 support level may trigger volatility. Position yourself with INFY20260116C18 for a bullish play or GLIN for sector exposure, but stay alert to macroeconomic shifts and AI partnership developments.