Infosys Plunges 2.95% Amid AI Guidance Hike and Volatile Options Activity – What’s Driving the Selloff?

Summary
• Infosys (INFY) gaps down 2.95% to $18.78, erasing a post-earnings 10% surge in ADRs
• FY26 revenue guidance raised to 3%-3.5% on $4.8B in AI-driven deal wins
• Options chain sees INFY20260220C18 and INFY20260220P18 dominate with $138K and $96K turnover

Infosys’ intraday volatility has intensified as the stock trades 2.95% below its previous close of $19.35, hitting a low of $18.51. The selloff follows a sharp post-earnings rebound driven by AI guidance upgrades, but institutional positioning and options activity suggest lingering uncertainty. With the IT sector under pressure and AI-driven momentum in question, traders are recalibrating exposure to INFY’s forward-looking narrative.

AI-Driven Guidance Hike Sparks Institutional Repricing
Infosys’ recent 10% ADR surge was fueled by a FY26 revenue guidance upgrade to 3%-3.5% and $4.8B in AI-related deal wins. However, the current selloff reflects a post-rebound profit-taking cycle and short-term volatility from options gamma effects. The gap-up move triggered stop-losses and forced institutional cover, but the lack of follow-through buying suggests the market is testing the sustainability of the AI-driven re-rating. Analysts at Stifel and Goldman Sachs have raised price targets to $19.00–$19.10, but the stock’s failure to hold above $19.00 indicates caution about near-term execution risks in large-scale AI projects.

IT Services Sector Under Pressure as IBM Slides 2.79%
The IT services sector is broadly underperforming, with sector leader IBM down 2.79% as of 20:16 ET. This aligns with INFY’s selloff, reflecting broader institutional caution in IT services amid macroeconomic uncertainty. While Infosys’ AI-driven growth story remains intact, the sector’s mixed performance highlights the challenge of sustaining momentum in a high-interest-rate environment. IBM’s decline underscores the sector’s vulnerability to margin pressures and execution risks in large-scale AI integrations.

Options and ETFs to Watch: Gamma-Driven Volatility and Strategic Strikes
• MACD: 0.098 (bullish divergence), Signal Line: 0.118 (bearish crossover), Histogram: -0.0198 (negative momentum)
• RSI: 57.68 (neutral), Bollinger Bands: 19.74 (upper), 18.38 (middle), 17.02 (lower)
• 200D MA: 17.49 (below current price), 30D MA: 18.20 (resistance)

INFY’s technical profile suggests a short-term bearish bias with key support at $18.18–18.27 (200D MA) and resistance at $19.00–19.09 (intraday high). The stock’s 52W range of $15.82–30.00 provides a broad context, but near-term volatility hinges on the $19.00 level. Options activity highlights two key contracts:

• INFY20260220C18: Call option with 30.37% IV, 7.09 delta, -1.31 theta, 0.1867 gamma, $138K turnover. This contract offers moderate leverage (15.10%) and liquidity, ideal for a bullish breakout above $19.00. Payoff: If INFY drops 5% to $17.84, the call’s intrinsic value would be $0.00 (strike $18.00), but gamma sensitivity could amplify gains if the stock rebounds.
• INFY20260220P18: Put option with 38.15% IV, -0.3199 delta, -0.0077 theta, 0.1557 gamma, $96K turnover. This put offers 37.01% leverage and strong gamma, making it a top pick for a short-term bearish play. Payoff: A 5% drop to $17.84 would yield $0.16 intrinsic value (strike $18.00), with theta decay manageable for a 20-day expiry.

Aggressive bulls should target a break above $19.00 with INFY20260220C18, while bears may short INFY20260220P18 if the stock fails to hold $18.50. Both contracts benefit from high gamma, amplifying directional moves in a volatile environment.

Backtest Infosys Stock Performance
The backtest of Infosys (INFY) after a -3% intraday plunge from 2022 to the present shows mixed results. The 3-Day win rate is 49.80%, the 10-Day win rate is 50.00%, and the 30-Day win rate is 49.21%. While the short-term win rates are decent, the overall return over the 30 days is a slight negative return of -0.42%, with a maximum return of only 0.04% during the backtest period.

INFY at Crossroads: AI Momentum vs. Institutional Caution – Watch $19.00 Support
Infosys’ current selloff reflects a tug-of-war between AI-driven optimism and institutional caution. While the FY26 guidance upgrade and $4.8B in AI deals validate long-term potential, near-term execution risks and sector-wide headwinds are testing the stock’s resilience. Traders should monitor the $19.00 level as a critical inflection point—holding it would confirm institutional accumulation, while a breakdown could trigger a retest of the 200D MA at $17.49. With IBM down 2.79%, sector-wide pressures add urgency to INFY’s technical setup. For now, the INFY20260220P18 put offers a high-gamma, high-leverage play on a potential $18.00 breakdown, while bulls eye a $19.00 retest with the INFY20260220C18 call. Position sizing and stop-loss discipline remain paramount in this volatile environment.