Infosys (NS:INFY) announced its results after market hours as is now the custom for most companies, especially in the Nifty 50 pack. The results were nothing great to talk about but it announced a buy-back worth 9,300 Crores from the open market with a cap of 1850. It also announced that an interim dividend of 16Rs per share would be paid as against the TCS (NS:TCS) dividend of 8Rs per share.
When the markets opened, there was a sharp gap-up opening of 300+ points in Nifty and it was led by Infosys which opened with a massive 4.5%+ gap-up. As against the same, TCS was mildly up at 1.5%, and as the day progressed it started fading and it ended up as one of the stocks responsible for dragging Nifty below 17200.
In my opinion, it appears that the market has dumped TCS in favor of Infosys looking at the buy-back cap price. I am unsure if Infosys would end up buying its shares at that high a price which would be at a premium of almost 30% to the closing price of 13-10. Also, TCS may have been dumped to buy 2 shares of Infosys for every 1 share held and get 2X the dividend!
I gave it a thought and decided that I would let the numbers decide as that would help me make an unemotional and logical choice about where I should deploy the funds that I was holding on to for such an opportunity. I will cover the buy-back part in another post.
I have explained the detailed workings in the attached video as it would be too long to do so in a document.
Here is the video link:
https://youtu.be/-IQbT3Syy0o
In summary, there are 4 options that have used to deploy the funds and these are:
- Invest only in TCS.
- Invest only in Infosys
- Invest in TCS & then exit and then buy Infosys
- Trade in TCS using a protected Put strategy (good only for those who are trading in FNO).
Now that you have watched the video, you will know that following is what I may do:
- Since I do trade in FNO, I may go for option 4.
- I have another account where I do not trade in FNO and for that, I may go with option 3.
Many times, we are guided by the amount of money that we may end up making in a transaction, however, if only we focus on the % ROI, it would help us make a logical choice irrespective of the fact whether I buy 1 share or 1000, my ROI is going to be the same. And not everyone (including me) would be able to buy 1000 shares of Infosys or TCS.
What do you think of the above? If you are having spare funds, not necessarily 100K, it may be more or less, which option would you prefer? I am open to receiving your responses.
Happy learning & earning!
Note:
Not SEBI Regd
The post was shared purely for informational & educational purposes only.