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Infosys Drags India Stocks Lower After Whistle-Blower Complaint

Infosys Drags India Stocks Lower After Whistle-Blower Complaint

(Bloomberg) -- Infosys Ltd. dragged India stocks lower after an anonymous whistle-blower complaint alleged the software exporter used irregular practices to shore up profits.

The S&P BSE Sensex declined 0.9% to 38,963.84 in Mumbai. The NSE Nifty 50 Index slipped 0.6%. Infosys sank 16%, weighing the most on both gauges and offsetting post-earning gains in HDFC Bank Ltd. and Reliance Industries Ltd. This is the sharpest decline for the software exporter since April 2013, data compiled by Bloomberg show.

Infosys Ltd. plunged after a letter addressed to company’s board and published by the Deccan Herald newspaper charged the company Chief Executive Officer Salil Parekh of “unethical practices” in recent quarters to boost “short term revenues and profits.”

The company, to ensure independence in investigations, has recused the company’s CEO and CFO from the matter, Infosys Chairman Nandan Nilekani said in a statement to stock exchanges.

Of the 13 Nifty companies that have announced results so far, eight have either met or exceeded analyst estimates.

Strategist View

  • “We expect the Infosys whistle-blower complaint to be negative for market sentiment. We await developments on the investigation as corporate governance issues are serious,” said Naveen Kulkarni, analyst at Reliance Securities Ltd.
  • “The issue (Infosys complaint) is likely to remain an overhang on the stock in the near-term given it raises questions over the credibility of the current management,” Arya Sen and Ankur Pant, analysts with Jefferies India Pvt Ltd. wrote in note.

The Numbers

  • Eleven of 19 sector sub-indexes compiled by BSE Ltd. advanced, led by a gauge of health care companies
  • ICICI Bank provided the biggest boost to the Sensex and had the largest gain, advancing 3.1%
  • S&P BSE Information Technology Index declined over 7%, its sharpest decline since April 2013

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To contact the reporter on this story: Nupur Acharya in MUMBAI at nacharya7@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Margo Towie, Naoto Hosoda

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