Infosys, India’s second- largest software services exporter, fell the most in 10 years in Mumbai trading as it forecast annual sales will rise slower than analysts estimated. Infosys Plunge Gives Options Traders 200% Profit on Strangle Bet

Infosys Plunges as Sales Forecast Lags Behind Estimates

Infosys Ltd. (INFO), India’s second- largest software services exporter, fell the most in 10 years in Mumbai trading as it forecast annual sales will rise slower than analysts estimated.

Shares plunged as much as 20 percent, the biggest drop since April 2003, to 2,337.35 rupees as of 9:21 a.m.

The spending budgets of customers in financial services, which contributed 27 percent of Infosys’s revenue in the third quarter, will drop, the company said last month. Pricing has been under pressure since the financial crisis for most information technology services providers and remains a key concern, according to Anurag Rana, an analyst at Bloomberg Industries.

“It is a real disaster for Infosys, primarily because their low guidance along with their fourth-quarter revenue which continues to drop,” said Amar Mourya, Mumbai-based analyst with India Nivesh Ltd. ’’Their confidence seems to be shaken with such a broad forecast and visibility looks poor.’’The company expects revenue to increase 6 percent to 10 percent in the year that started April 1, it said. Analysts estimated sales to grow 12.7 percent to 454.7 billion rupees ($8.3 billion), based on the average of 66 estimates compiled by Bloomberg.

India’s information technology industry is forecast to expand as much as 14 percent in the year started April 1, according to Som Mittal, president of Nasscom, an industry group.

Net income rose to 23.9 billion rupees in the three months ended March 31 from 23.2 billion rupees a year earlier, Bangalore-based Infosys said today. That exceeded the 23 billion-rupee median of 41 analyst estimates compiled by Bloomberg. Sales rose to 104.5 billion rupees from 88.5 billion rupees, compared with the 107.5 billion-rupee median of 46 analyst estimates compiled by Bloomberg.

To contact the reporters on this story: Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net; Suresh Seshadri in Bangalore at sseshadri1@bloomberg.net

Infosys Plunge Gives Options Traders 200% Profit on Strangle Bet

Options traders who bet Infosys Ltd. (INFO)’s sales outlook would surprise investors tripled their money today as the stock tumbled the most in a decade.

Traders who bought out-of-the money puts and calls on Infosys yesterday, a wager known as a strangle that benefits when volatility increases, earned 217 percent as of 1:28 p.m. in Mumbai, based on the most-traded contracts. A similar strategy called a straddle returned 107 percent, data compiled by Bloomberg show. Infosys shares tumbled 20 percent to 2,346.5 rupees, set for the biggest drop since April 2003, after the company’s annual sales forecast trailed analysts estimates.

The windfall shows few traders anticipated Infosys would swing so much. The shares moved an average 11 percent the previous two times Infosys reported results. The Bangalore-based company, India’s second-largest software maker, said annual sales may rise as little as 6 percent in the year ending March 2014, versus the 12.7 percent average estimate of analysts surveyed by Bloomberg.

“Obviously no one could predict such a move” in Infosys shares, Manoj Murlidharan, vice president at Mumbai-based India Infoline Ltd. (IIFL), said in a phone interview today. “But those who got on the right side of the trade made a lot of money. The bearish squeeze will keep Infosys stock under pressure.”

Strangle Payout

Today’s share move was more than double what the options market was expecting as of yesterday, based on prices paid for April contracts with a strike price closest to yesterday’s closing share price.

Infosys closed yesterday at 2,916.7 rupees. At the same time, the price of the 2,900 straddle, which combines a put and a call at that strike price, was 270 rupees. That indicates traders expected a move of about that amount, or 9 percent, in order to break even on the position.

A strangle combining 3,100 calls, yesterday’s most-traded call contract, with 2,700 puts, cost 112.95 rupees yesterday, based on closing prices. The combination was valued at 357.6 today.

Volumes in Infosys’ put options jumped to 232,845 contracts today from 125,421 contracts yesterday. Put trading exceeded calls for the first time in a month. Puts give the right to sell a security for a certain amount, called the strike price, by a given date. Calls convey the right to buy.

To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Michael Patterson in Hong Kong at mpatterson10@bloomberg.net