“TCS results will not lead to a big rally or short covering in the IT space. Profit booking will continue in the space for some time,” said Siddarth Bhamre, research head at Religare Broking.
The Nifty IT index is down nearly 4% so far in April as against the 1.2% gain in the Nifty in the same period. L&T Technology Services, Mphasis, Infosys, Persistent Systems, Tech Mahindra, HCL Tech, Mindtree, TCS, Wipro and L&T Infotech are down over 1-7%. In the derivatives segment, traders have added bearish bets on IT stock derivative contracts ahead of the results season, with open interest up 10-45% along with decline in prices.
Analysts said TCS could witness a relief rally after the results, which could rub off on its peers but a major rebound is not on the cards. Software services companies are battling wage cost inflation which could impact margins in the coming quarters. TCS’s numbers are not a major positive deviation from what was expected, they said.
TCS reported a net profit of ₹9,926 crore, up 1.6% sequentially; while revenue at ₹50,591 crore was up 3.5% sequentially. Margins stood at 24.96% compared to 25.03% a quarter ago.
“Infosys, Wipro and Tech Mahindra are heading towards support levels and in a downtrend. One should not hurry to take exposure in the IT space,” said Bhamre.
The Nifty IT index is down nearly 10% for calendar year 2022 so far. From March 24, 2020, when the Nifty hit the pandemic time low, the Nifty IT index had gained 56%.
“TCS’ numbers are decent in the context of wage inflation… there is nothing to point towards a big selloff, but if there is further weakness in global tech space, Indian IT companies’ shares could fall as well,” said independent market advisor Sandip Sabharwal.
Rajesh Palviya, head – technicals and derivatives at Axis Securities, said there could be some short covering in TCS as well as its peers but not so much in Infosys as investors will refocus on the company’s quarterly earnings due on Wednesday.
TCS shares could rise to 3,900-4,000 in the April series, he said.
