Infosys Plunges 4.17%, Unraveling the Mystery Behind the Sharp Drop

Summary
• Infosys (INFY) slumps 4.17% to $17.68, its lowest since $15.82
• Q1 FY26 earnings matched estimates, but revenue growth failed to excite
• MACD and RSI signal bearish momentum amid oversold conditions
• Options market sees heavy put activity on $17 and $18 strikes

Infosys is in freefall as investors digest mixed Q1 results and sector headwinds. Despite matching earnings estimates and 4.8% revenue growth, the stock has cratered from its $17.88 intraday high to $17.59, a 4.17% drop. The sell-off coincides with a broader tech-sector selloff led by IBM’s 7.8% decline, raising questions about whether the move reflects profit-taking or deeper concerns about AI-driven transformation execution.

Q1 Results Miss the Mark for Bullish Momentum
Infosys’ Q1 FY26 report, while technically positive (19 cents EPS, $4.94 billion revenue), failed to ignite bullish sentiment. The company’s 1-3% revenue growth guidance—well below its 7.5% YoY performance—sent a clear signal of cautious optimism. Worse, operating margins contracted to 20.8%, a 30-basis-point decline, as wage hikes and AI investments ate into profitability. The market’s sharp reaction suggests investors are pricing in near-term margin pressures and skepticism about the scalability of its AI-led Topaz platform. With the stock now trading at 23.26x forward earnings, the sell-off reflects a recalibration of expectations amid macroeconomic jitters and sector-wide volatility.

IT Services Sector Plunges as IBM Leads the Charge
The IT Services sector is in turmoil, with IBM’s 7.8% intraday drop amplifying fears of a sector-wide correction. Infosys’ 4.17% decline aligns with broader weakness, particularly in AI-focused peers like Cognizant and TCS. The VanEck Digital India ETF (DGIN) and Global X India Active ETF (NDIA) have fallen 1.76% and 1.09%, respectively, underscoring regional underperformance. This synchronized sell-off highlights investor concerns about margin sustainability in AI-driven transformation projects and macroeconomic headwinds affecting global IT spending.

Bearish Setup: Puts on $17-$18 Strikes Offer High-Leverage Bets
• 200-day average: $20.18 (well above current price)
• RSI: 41.08 (oversold territory)
• MACD: -0.0203 (negative momentum)
• Bollinger Bands: $17.9032 (lower band) vs. $17.68 (current price)

INFY is in a bearish technical setup, with the RSI signaling oversold conditions and the MACD confirming downward momentum. The 200-day moving average at $20.18 is a critical resistance level to watch. For aggressive short-term bearish bets, the INFY20250815P17 and INFY20250919P18 puts stand out. These contracts offer high leverage (103.91% and 26.37%) and moderate delta (0.25 and 0.57), balancing sensitivity to price moves with time decay (theta: -0.00398 and -0.000877).

INFY20250815P17
• Code: INFY20250815P17
• Type: Put
• Strike: $17
• Expiration: 2025-08-15
• IV: 24.67% (mid-range)
• LVR: 103.91% (high leverage)
• Delta: -0.2517 (moderate sensitivity)
• Theta: -0.003982 (moderate time decay)
• Gamma: 0.291284 (high sensitivity to price swings)
• Turnover: 1,309 (liquid)
• Put Payoff: $0.32 (5% downside from $17.68)
• Why it works: High gamma and moderate delta make it ideal for a sharp move below $17.59.

INFY20250919P18
• Code: INFY20250919P18
• Type: Put
• Strike: $18
• Expiration: 2025-09-19
• IV: 18.26% (low)
• LVR: 26.37% (moderate leverage)
• Delta: -0.5708 (high sensitivity)
• Theta: -0.000877 (low time decay)
• Gamma: 0.303725 (high sensitivity to price swings)
• Turnover: 2,014 (liquid)
• Put Payoff: $0.32 (5% downside from $17.68)
• Why it works: High gamma and delta position it to capitalize on a sustained move below $18.1784 (200D support).

If $17.59 breaks, INFY20250815P17 offers a high-leverage bearish play. Aggressive bulls may consider INFY20250919C19 into a bounce above $18.4992 (30D support).

Backtest Infosys Stock Performance
After a -4% intraday plunge, Infosys (INFY) has historically shown a positive short-to-medium-term performance. The backtest data reveals that the 3-day win rate is 54.50%, the 10-day win rate is 55.33%, and the 30-day win rate is 55.83%, indicating a higher probability of positive returns in the immediate aftermath of such a significant correction. The maximum return during the backtest period was 2.02%, which occurred on day 56, suggesting that while the stock tends to recover, the magnitude of the rebound is generally modest.

Act Now: Short-Term Bearish Playbook for INFY
The sharp drop in Infosys reflects a combination of bearish technicals and sector-wide jitters. With RSI in oversold territory and puts on $17-$18 strikes seeing heavy activity, the setup favors short-term bearish plays. Investors should monitor the 200-day moving average at $20.18 and the sector leader IBM, which has plummeted 7.8% intraday. For those seeking directional clarity, the INFY20250815P17 and INFY20250919P18 puts offer high-leverage exposure to a potential breakdown below $17.59. Watch for a retest of $17.9032 (lower Bollinger Band) or a sector-wide reversal to pivot.