TCS triggers fall in frontline indices after mixed Q3 results; this analyst puts stock in no-go zone

Tata Consultancy Services (BSE: TCS) shares fell on Tuesday, weighing on frontline indices along with the stock of the IT major's large-cap peer Infosys. The TCS stock dropped by as much as Rs 88.7 or 2.7 per cent to Rs 3,231 apiece on BSE, a day after the country's largest IT services firm reported a mixed set of quarterly results.  

After market hours on Monday, TCS reported a net profit for the October-December period that was lower than analysts' estimates, though its revenue exceeded the estimates.  

TCS reported a quarter-on-quarter increase of four per cent in net profit to Rs 10,846 crore for the three-month period. 

The IT giant's quarterly revenue rose 5.3 per cent sequentially to Rs 58,229 crore. 

According to Zee Business research, TCS was estimated to report a quarterly net profit of Rs 11,270 crore and revenue of Rs 57,280 crore. 

TCS CEO Rajesh Gopinathan said its strong growth in a seasonally weak quarter was driven by Cloud services, market share gains through vendor consolidation, and continued momentum in North America and the UK.

Technical analyst Nilesh Jain warned of profit booking in Tata Consultancy Services shares as the company's quarterly results, in his view, did not meet market expectations. 

He suggests avoiding the large-cap IT space at the current juncture. Investors must focus on mid-cap and small-cap stocks in the sector, said Jain, Assistant Vice President-Lead Derivative and Technical Research at Centrum Broking. 

He likes stocks such as Firstsource Solutions, KPIT Tech and L&T Tech Services.  

Jain expects pressure in the Nifty IT index ahead. The index has been seeing a lower top lower bottom formation on the technical charts and has been one of the biggest laggards of 2022, the Centrum Broking analyst pointed out.  

One can expect a pullback in the sector but no major upside in the sector over the near term, he said. 

What to do with TCS shares now

Sandeep Wagle, CEO of Sandeep Wagle Advisory Services, sees important support for TCS shares at Rs 3,200, a level he said that the stock is likely to continue to hold three weeks running. 

There will be buying opportunities around this level, though the upside remains limited, Wagle said.  

CLSA maintained an ‘outperform’ rating on TCS shares and raised its price target to Rs 3,550 from Rs 3,500.  The brokerage's recommendation for TCS came at the market price of Rs 3,320. 

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)