When trust is lost, everything is lost. Fortunately, at least for stocks, that trust can be reestablished with good results and good execution. But now, the moment has come which we just a month ago warned about and cashed good part of the position in Infosys and started selling covered calls. We won’t repeat the arguments here about why we did it from the previous post but rather want to share the next trade idea instead.
Now the game plan should be to let the disappointed investors liquidate. Let the stock stabilize and get back in again. Simple ! Let it get back around 900 and start picking the stock from there again. Of course it depends upon market condition that how much one should invest at that level but as a trader, these good support levels shown in the chart will at least give us good trading range.
On broad perspective, if Indian IT companies won’t reinvent themselves then eventually they will top out. Earlier they have milked international clients by charging ridiculous amounts for routine work but now clients have become smart. If India has cheap labor and that’s the only thing these IT giants like to relay upon then their heady days are numbered. Because big IT spender companies are already putting their subsidiaries on Indian shore to take advantage of that. Many US firms have established their offices in India and getting work done cheaply. So ho-hum outsourced work is not going to give a constant earning boost but rather steady income. And when a company don’t have any exceptional product, anybody can replace it by just quoting less price! The point is that big IT companies like TCS and Infosys are good, but they last, until they last ! They won’t keep on growing with the same pace and investors should keep that in mind.
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