Here is a quick question. If a company declares a consolidated net profit of Rs 2,372 crore in December 2011 and declares Rs 2,369 crore in December 2012, what will happen to the stock? Here are your choices.
 

a. It will rise a lot

b. It will fall a lot

c. It will be almost stagnant

d. None of the above
 

Well, most sensible person will say go for option c. After all, if the profit is completely stagnant, actually, down a bit in this case, what impact could it possibly have on the stock?
 

Well, here is what happened to the stock. It went up 17%. The stock in question is Infosys, which made this monster move on Friday 11^th Jan. Why did the stock move up so much on lacklustre results?
 

Three reasons. One, a huge move in any stock is caused by surprise. Apparently, Infosys beat expectations of analysts and fund managers which was a pleasant surprise. Two, a lot of people had sold Infosys, fearing bad results. They rushed to buy back. Three, there are huge pools of speculative money that rushes in when speculators see the there first two factors in play.
 

Is this kind of rise sustainable? Well, there may be some upward pressure for a day or two but the stock of a company whose business and bottomline are not growing, cannot keep rising. By the way, Sensex is about 5% below the closing of December 2010. Where was Infosys at that time? Above Rs3400. Yesterday, after the monster move, it was still at Rs2712, down 21%. Over the long term, earnings growth is what decides where a stock is headed, not one day monster moves.