TCS, HCL Tech, Infy: How to trade IT stocks ahead of Q3 results?

The overall trend in the IT stocks have remained laggard and continues to bear high risk element.

Tata Consultancy Services will kick off the Q3FY23 results season on Monday and its outcome with future guidance will pave the way for the Information Technology (IT) sector going ahead. HCL Technologies and Infosys are next in line to report their earnings later this week.

IT index, overall, has been an underperformer for the entire CY2022, losing 26 per cent. While the index plummeted 23 per cent and 3 per cent in Q1FY23 and Q2FY23, it managed to regain modest sentiment by gaining 6 per cent in the Q3FY23.

Individually, the biggest losers so far in the current earning season of FY23 are Mphasis and Wipro, which have plunged 39 per cent and 34 per cent, respectively.

Shares of L&T Technology Services and Tech Mahindra could revive their positive bias since the second quarter of FY23, by consecutively closing higher. L&T Technology Services gained 18 per cent in Q2FY23 and close to 3 per cent in Q3FY23. Similarly, Tech Mahindra advanced 2 per cent and 3 per cent in the respective quarters.

On Monday, Tech Mahindra and Coforge were the top gainers rising over 3 per cent respectively, while TCS and Persistent Systems rose close to 3 per cent each. Infosys gained 2.40 per cent. 

Thus, Will this results season embrace the upside bias or continue its tussle to absorb sell-off? To help you understand this, here’s the technical outlook:-

NIFTY IT INDEX

Outlook: Trading in a range

The IT index is facing difficult times to overcome the range of 32,000 to 31,000 levels since last May. While the index is unable to take out this barrier, it is witnessing accumulation in the range of 27,000 to 26,000 levels. The broad trend is pierced in this range and any move out will determine the next course. The immediate hurdle is at 29,000-mark, with support staying at 27,400 levels. CLICK HERE FOR THE CHART

Tata Consultancy Services Ltd (TCS)

Likely target: Rs 3,650 (once crosses Rs 3,400)

Upside potential:  7%

The current daily chart suggests a formation of “Head and Shoulder” pattern and until the hurdle of Rs 3,400 is not crossed, the trend could see every upside witnessing sell-off. The immediate trend is indicating a sideways move in the range of Rs 3,300 to Rs 3,250 levels. A breakout over Rs 3,400 may see a sharp rally hitting previous high of Rs 3480 and if that momentum sustains, the counter may even rise to Rs 3,650 levels, the next key resistance.  CLICK HERE FOR THE CHART

Infosys Ltd (INFY)

Outlook: Stock needs to break through the 200-DMA

Infosys shares are trading beneath the significant mark of 200-day moving average (DMA) set at Rs 1,519 level, reflecting a negative bias. Following this breach of the crucial mark, the stock slipped under the next support of Rs 1,480. Thus, until the counter overcomes these two barriers, the trend could encounter weakness and a build-up of negative bias. A breakout over the 200-DMA could see stock reaching Rs 1,650 levels. The support for the stock is placed at Rs 1,400 levels. The technical indicator, Moving Average Convergence Divergence (MACD) trades in a negative crossover under the zero line, reflecting a pessimistic outlook. CLICK HERE FOR THE CHART

HCL Technologies Limited (HCLTECH)

Likely target: Rs 1,150 (after crossing Rs 1,075)

Upside potential:  7%

As long as the counter protects the support of 200-DMA placed at Rs 1,004-mark, the positive bias is anticipated to prevail. On the upside, the present sideways consolidation if manages to breakout over Rs 1,075, with aggressive volumes, the price action could then see a rally towards Rs 1,150 levels.  CLICK HERE FOR THE CHART

Wipro Ltd (WIPRO)

Outlook: Bearish trend

Over the last eight months, the price action of Wipro shares has been on a downward spiral. The stock has gradually fallen in the bear grip and continues to trade, with a negative bias. The broad “Lower High, Lower Low” formation has dented the upside bias and as long as the stock trades under Rs 420, the sluggishness is expected to stay afloat.  The immediate support is at the 52-week low of Rs 372.40. Breach of this mark could push the counter in a medium-term bear trend, with price falling to Rs 320-Rs 300 range. CLICK HERE FOR THE CHART