Infosys ADR's 40% Surge: Glitch or Short Squeeze?

Unprecedented Volatility Hits Infosys ADR

Trading in Infosys Ltd.'s American Depositary Receipts (ADRs) was abruptly halted on the New York Stock Exchange (NYSE) on Friday, December 19, 2025, after the stock experienced an extraordinary and largely unexplained surge of nearly 40% within minutes of the opening bell. The sudden spike, which pushed the ADR price to a 52-week high of $30, triggered the exchange's 'Limit Up-Limit Down' circuit breakers, which are designed to curb extreme market volatility. The event left traders and market analysts searching for explanations, as there was no company-specific news or fundamental catalyst to justify such a dramatic revaluation. This anomaly created a significant disconnect with the company's primary shares on India's National Stock Exchange (NSE), which had closed the day with a modest gain of just 0.74%.

How the Event Unfolded

The chaos began early in the U.S. trading session. Without any press releases or regulatory filings from the Bengaluru-based IT giant, the INFY ticker began a steep ascent on heavy volume. As the price breached the volatility thresholds, the NYSE's automated systems invoked a mandatory trading pause. When trading resumed, the price remained erratic before selling pressure eventually pushed the ADRs back toward a more fundamentally sound level, settling at $20.22. This confirmed that the move was a technical outlier rather than a genuine shift in the company's outlook. In an official filing, Infosys clarified that there were “no material events that require disclosure” under listing regulations, reinforcing the technical nature of the incident.

Theory 1: The Technical Glitch

Investigations into the bizarre price action point toward a combination of technical failures and market dynamics. A leading theory centers on a technical glitch related to ticker mapping. In the days leading up to the event, several prominent financial data providers, including Zacks and MarketBeat, reportedly began erroneously identifying the 'INFY' ticker as 'American Noble Gas Inc.' in their automated data feeds. While the financial data attached to the ticker still reflected Infosys's metrics, including its $75 billion market cap and AI investments, this name mismatch is believed to have confused automated trading algorithms. These systems, programmed to identify mispriced assets or sudden momentum shifts, likely interpreted the data discrepancy as a powerful buy signal, creating a feedback loop that fueled the rally.

Theory 2: A Massive Short Squeeze

Compounding the issue was a suspected short squeeze. Market analysts and traders reported that a major lender recalled a substantial block of borrowed shares, estimated to be between 45 to 50 million. This action would have forced traders who had shorted the stock—betting on a price decline—to buy back shares immediately to cover their positions. The problem was that Infosys ADRs typically trade with an average daily volume of around 7-8 million shares. This sudden, forced demand for a massive number of shares in a relatively illiquid market created a severe supply-demand imbalance, mechanically driving the price upward. The timing of the event, a Friday during a holiday season known for low trading liquidity, amplified the situation, allowing a smaller number of trades to have an outsized impact on the price.

Key Event Data

Broader Market Context

The incident occurred against a generally positive backdrop for the IT sector. Accenture had recently reported strong first-quarter results, beating revenue expectations and showing robust growth in AI-related bookings. This news had provided a tailwind for Indian IT stocks, including Infosys. However, analysts unanimously agreed that this positive sentiment alone could not explain the magnitude of the ADR surge. The impact on other Indian IT ADRs was mixed; Wipro's ADR rose in sympathy, likely due to correlated algorithmic trading, while peers like TCS and HCLTech traded within normal ranges, underscoring the isolated nature of the Infosys event.

The Vulnerability of ADRs

This event serves as a stark reminder of the unique risks associated with ADRs, which function as a bridge between domestic and foreign markets. Because ADRs trade during U.S. hours while the underlying Indian markets are closed, they are susceptible to a 'price discovery vacuum.' Without the anchor of the home market to provide a stable price reference, ADRs can become unmoored by rumors, technical glitches, or speculative trading. The massive disconnect between the nearly 40% surge in New York and the sub-1% move in Mumbai highlights this vulnerability perfectly.

Conclusion and Outlook

The dramatic surge and subsequent halt of Infosys ADRs will be remembered as a bizarre trading event that underscores a critical reality of modern finance: the speed of automated trading can far outpace the accuracy of the information driving it. The incident was a perfect storm of a data error, a massive short squeeze, and low market liquidity. The U.S. Securities and Exchange Commission (SEC) is expected to review the trading activity. For investors, it is a powerful lesson in caution, proving that even stable, blue-chip companies are not immune to the 'ghosts in the machine' that can emerge in highly automated and interconnected global markets.