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Shares of Infosys were trading over two per cent higher in early trade. Find out why the company's shares jumped sharply despite weak market sentiments due to rising Covid-19 cases.

 hares of major Indian IT firm Infosys hit a fresh high of nearly Rs 1,480 — a 52-week high — after rising 2.7 per cent on the Bombay Stock Exchange in early trade on Monday.

The shares of the IT firm rose after it announced that it will consider a proposal for buying back fully paid-up equity shares of the company at its board meeting to be held on April 14, 2021. The company announced the same in a release on the exchanges.

“The board of the company will consider a proposal for buyback of fully paid-up equity shares of the company at its meeting to be held on April 14, in accordance with the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018,” the statement said.

The Infosys board will meet on April 13 and April 14 to approve and take on record the consolidated financial results of the company for the quarter ended March 31, 2021.

WHAT IS A BUYBACK?

A buyback is an option for repurchasing free-float equity shares of a company by promoters. The company pays its shareholders a fixed value per share and takes back equity shares, which were distributed among public and private investors, as part of its ownership.

It may be noted that the buyback is beneficial for investors as the company pays a higher price for equity shares than the market value.

There are various reasons why companies opt for buybacks including plans to consolidate ownership, increasing key financial ratios and strengthening company finances.

Infosys has already announced two buybacks in the past and this will be the third one. In 2017, the company conducted its first buyback of shares, returning Rs 13,000 crore to investors at Rs 1,150 per share. Infosys conducted its second buyback in 2019 at Rs 800 per share.

Several brokerage firms expect Infosys to report a 4.5 per cent quarter or quarter (Q-o-Q) increase in revenues in constancy currency terms. They are also optimistic about the company’s recent dealings, which were focused on accelerating digital businesses.

Infosys shares were trading over two per cent higher in early trade, soon after the company revealed its buyback plan. However, the overall market weakness has erased the company gains.

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