TCS gains 5% in two days, stock at life-time high ahead of Q2 results

Shares of Tata Consultancy Services hit a new high at Rs 3,990, up 2.5 per cent on the BSE in Friday’s intra-day trade, and has now gained 5 per cent in the last two trading sessions, ahead of its July-September quarter (Q2FY22) results. The information technology (IT) will announce last quarter results late in the evening today. The stock surpassed its previous high of Rs 3,981.55 touched on September 16, 2021.

The recent Accenture guidance suggests the demand environment for Indian IT companies continues to be strong. In our view, it is not a quarter phenomenon but there are some structural changes happening on the ground that may bring cheer for Indian IT companies in years to come, analyst at ICICI Securities said in IT sector report.

Covid-19 has made industries across the globe bring about changes to adapt to the Work from Home environment with minimal disruption to their business models. This also led businesses to change their model from captive to outsourcing, which is expected to benefit Indian IT companies. We do not rule out margin pressure on Indian IT companies in the near term but in the long term, strong revenue growth may help to tide over these costs, analyst said.

TCS is expected to continue its strong revenue traction for the quarter but margins are expected to be impacted due to lower utilisation and higher subcontracting costs. It is expected to register 3.5 per cent QoQ growth in constant currency led by improvement in demand from BFSI, healthcare and retail, acceleration in digital technologies and ramp up of deals and also recovery from India market, which declined 14 per cent QoQ in Q1, the brokerage firm said in Q2 result preview.

Meanwhile, most brokerages are pencilling in double-digit growth in net profit and revenue for TCS, led by improvement in demand from BFSI, healthcare and retail, acceleration in digital technologies and ramp-up of deals along with recovery from the India market. Furthermore, persistent market share loss of key players such as Capgemini and Cognizant is also expected to directly benefit TCS. CLICK HERE FOR BROKERAGES VIEW