The mood of the broader markets worsened on Wednesday after higher-than-expected US CPI data, at 3.1%, compared to the forecast of 2.9%. Moving in sync with the US market, the benchmark Nifty 50 index is down 0.85% to 21,560 by 9:39 AM IST, and one of its constituents that’s dragging it is Infosys (NS:INFY) Limited. It is a large-cap IT giant with a market capitalization of INR 6,97,217 and trades at a TTM P/E ratio of 28.59.
On the technical front, the stock took a decent hit of 2.5% to INR 1,644 and slid below its crucial rising trendline support, marking the initiation of a short-term downtrend. If the leader is not looking in good shape, then other IT counters might follow the route.
Another interesting pattern to note at the top end of the rally is the bearish harami candlestick pattern on 7 February 2024, which is a signal of a potential top. Hence, the ongoing fall might get extended to the next support level of INR 1,590.
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On the fundamental side, the stock is already overvalued with a fair value of INR 1,547, translating into a 6% downside potential. Such fair values are an important indication of whether one should make a bullish or a bearish opinion on the stock, especially for those who want to blend fundamentals into their technical analysis.
There is some resistance around INR 1,693. If the stock takes a U-turn and surges past this level, then the move can weaken the downtrend.
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