Q2 impact: Infosys, TCS can fall up to 9%; HCLTech may rise 5%, show charts

IT majors - TCS, Infosys and HCL Technologies flagged concerns of slower growth going ahead after announcing the Q2 results in the last two days.

IT stocks have been in the thick of action in the last two trading sessions amid the Q2 earnings performance by majors - TCS, Infosys and HCL Technologies (HCLTech). So far on Friday morning, Infosys was down 2.5 per cent while HCL Technologies and TCS were up 1.5 per cent and 0.6 per cent, respectively.

However, since the last two trading sessions, Infosys has shed over per cent at the lowest point of the day today. HCLTech 3 per cent and TCS 2.5 per cent.

Infosys yesterday lowered its FY24 revenue growth guidance to 1.0-2.5 per cent in constant currency terms from its earlier projection of 1.0-3.5 per cent growth. The IT major, however, maintained its operating margin guidance at 20-22 per cent for FY24.

For the second quarter of FY24, Infosys reported net profit of Rs 6,212 crore up 3.2 per cent YoY. Revenues grew 6.7 per cent YoY to Rs 38,994 crore.

Meanwhile, HCLTech reported a 9 per cent YoY growth in net profit at Rs 3,833 crore for Q2FY24. Consolidated revenue rose by 8 per cent YoY to Rs 26,672 crore. Further, the company lowered its FY24 revenue guidance to 5-6 per cent YoY growth in constant currency terms as against its estimate of 6-8 per cent growth. 

Earlier on Wednesday, Tata Consultancy Services (TCS) hinted of a softer FY24 growth while reporting an 8.7 per cent YoY growth in net profit for the September quarter at Rs 11,342 crore, below Bloomberg estimates of Rs 11,409 crore. Further, TCS announced share buyback worth Rs 17,000 crore, at Rs 4,150 per share.

Against this backdrop, what should be your investment strategy in these three largecap IT stocks? Here's how these stocks look on charts at present levels.

Infosys

Current Price: Rs 1,430

Resistance: Rs 1,443; Rs 1,505

Support: Rs 1,401; Rs 1,378

Downside Potential: 9%

Infosys is seen testing support at its 200-DMA (Daily Moving Average) placed at Rs 1,401, below which immediate support for the stock is seen at Rs 1,378. Presently, momentum oscillators are negative hence; the stock may face some downward pressure or consolidate side-ways in the near-term.

Earlier on September 15, the stock has witnessed a 'Golden Crossover' with the 50-DMA moving above the 200-DMA. However, post that, the stock has failed to show any significant upside momentum. 

As the stock seems to be facing considerable resistance around its 100-WMA (Weekly Moving Average) since September. The 100-WMA is currently placed at Rs 1,505. The stock needs to clear this hurdle in order to gain fresh upside momentum. Failure to do so, could see the stock dip back towards its 200-WMA at Rs 1,300 level - thus suggesting a downside potential of 9 per cent from current levels.

Meanwhile, the overall chart structure continues to remain favourable with the short-term (20-DMA) above other key moving averages on the daily chart. Today, the stock slipped below the 20-DMA, which stands at Rs 1,443. Hence, going forward this level may act as an immediate resistance.

In conclusion, stock has near support around Rs 1,401 and Rs 1,378 on the daily chart. Whereas, the Rs 1,505 level remains a key hurdle on the weekly chart. CLICK HERE FOR THE CHART

HCLTech

Current Price: Rs 1,246

Resistance: Rs 1,259

Support: Rs 1,212

Upside Potential: 5%

The price-to-moving averages action is favourable for the HCLTech both on the daily and the weekly charts. However, select momentum oscillators had been negative hence the stock witnessed a tepid performance in the recent past.

The 14-day RSI on the daily chart is now on the verge of turning favourable, similarly, the MACD (Moving Average Convergence-Divergence) too may turn positive in case the stock sustains the upward bias for the next few sessions.

Presently, the stock is seen testing some resistance at its 20-DMA at Rs 1,259. Break and sustained trade above the same can trigger a rally to Rs 1,310 - which is the higher-end of the anticipated trading band on the daily time-frame.

On the flip side, the stock needs to sustain above its 50-DMA which also coincides with the lower-end of the Bollinger Band at Rs 1,212-odd levels, in order to maintain the positive bias. CLICK HERE FOR THE CHART

TCS

Current Price: Rs 3,560

Resistance: Rs 1,473; Rs 1,505

Support: Rs 3,490

Downside Potential: 5%

In mid-July the price-to-moving averages action turned favourable for TCS, with its 20-DMA and 50-DMA simultaneously crossing the 200-DMA. Since then, the stock rallied 13 per cent to its recent high of Rs 1,379 hit on October 09. 

The overall structure, based on price-to-moving averages continues to remain favourbale for the stock, with the 20-DMA and 50-DMA still firmly above other longer-term moving averages.

However, key momentum oscillators on the daily and weekly chart have witnessed a negative crossover. Thus, the stock may remain tepid and trade sideways in the near term.

Presently, the stock is trading below its 20-DMA which stands at Rs 3,581, which is now likely to act as an immediate resistance. On the downside, the stock seems headed towards its 50-DMA at Rs 3,490. Given the negative divergence on key momentum oscillators, a sustained fall towards the 100-DMA cannot be ruled out. 

The 100-DMA stands at Rs 3,392 - thus indicating a downside potential of up to 4.7 per cent. CLICK HERE FOR THE CHART