Shares of Indian IT giant Infosys, traded in the United States as American Depositary Receipts (ADRs), experienced a breathtaking and highly unusual surge on Friday, December 19. The stock skyrocketed by as much as 40% within minutes of the market opening, briefly adding tens of billions of dollars to the company's market valuation.
The Frenzied Rally and Trading Halt
The sudden and explosive move pushed the Infosys ADR, ticker INFY, to a 52-week high of $30. The extreme volatility was so severe that it forced the New York Stock Exchange (NYSE) to halt trading in the security. This dramatic spike occurred during a holiday-shortened session characterized by low liquidity, and notably, it was not linked to any new corporate announcement or financial results from Infosys itself.
The sheer speed and scale of the rise left traders and analysts stunned. Such extreme price swings are exceptionally rare for a large-cap, widely followed stock like Infosys. The trading pause underscored how fragile financial markets can become when automated trading systems dominate activity in an environment with thin trading volumes.
Unraveling the Mystery: Short Squeeze or Technical Glitch?
Market participants scrambled for explanations in the absence of fundamental news. One leading theory points to a potential short squeeze. This occurs when investors who have bet against a stock (short sellers) are forced to buy back shares rapidly as the price rises, creating a feedback loop that pushes prices even higher.
Traders cited reports suggesting a major lender may have recalled a massive 45 to 50 million Infosys ADR shares that had been lent out for short selling. This figure dwarfs the typical daily trading volume of around seven to eight million shares. In an illiquid market, such a large-scale recall could have triggered a frantic scramble by short sellers to cover their positions, amplifying the price spike.
An alternative theory centres on a technical data error. According to reports, several market data platforms incorrectly labelled the 'INFY' ticker as belonging to 'American Noble Gas Inc.' While the company name was wrong, the financial data and news feeds attached to the ticker still pertained to Infosys, including information about its AI investments and its market value. This mismatch may have confused algorithmic trading systems, triggering automated buy orders that added fuel to the rally.
Sector Context and Company Clarification
The broader Indian IT sector had recently found some support after Accenture posted better-than-expected results. However, analysts were unanimous that this positive sentiment alone could not account for the parabolic move seen in Infosys ADRs.
In response to the volatility, Infosys issued a clarification to the exchanges. The company stated that while its ADRs experienced sharp price movements on December 19, leading to two volatility trading pauses on the NYSE, there were "no material events that require disclosure" under listing regulations. The company effectively ruled out any undisclosed corporate development as the cause.
Whether driven by a short squeeze, a technical glitch, or a combination of both, this episode serves as a stark reminder of how quickly markets can spiral when low liquidity, automated trading, and data errors collide—even for established blue-chip stocks like Infosys.
