Surge in Share Prices of TCS, Wipro, and Infosys: An In-depth Analysis
The Indian IT sector experienced a surge in buying interest during early morning trading sessions, following the announcement of improved margins, attrition rates, and order inflows by Tata Consultancy Services (TCS) for the April to June 2023 quarter. Furthermore, the easing of the US dollar, spurred by positive US CPI data, contributed to the positive market sentiment. As a result, TCS witnessed a significant increase of approximately 3 percent in share price during the early morning session. Similarly, Infosys observed a rise of around 3 percent in share price, while Coforge recorded an addition of approximately 2.50 percent during morning deals.
Reasons Behind the Surge in IT Stocks: Positive TCS Q1 Results and US CPI Data
The upward movement in IT stocks can be attributed to two significant factors, as explained by Vaibhav Kaushik, Research Analyst at GCL Broking. Firstly, the strong Q1 results reported by Tata Consultancy Services (TCS) have had a profound impact on the market. TCS, being a key player in the Indian IT sector, has successfully showcased improvements in order book intake, margins, and attrition rates. These areas of concern were closely monitored by a majority of Indian equity investors. The robust Q1 performance by TCS has, therefore, generated buying interest in TCS shares, with investors expecting similar positive outcomes from other industry giants such as Wipro and Infosys.
The second factor contributing to the rise in IT stocks is the release of US Consumer Price Index (CPI) data, which indicates a two-year low. The easing of US CPI has led to a favorable market environment, as it impacts the value of the US dollar. In turn, this positively affects Indian IT companies, as a weaker US dollar enhances their competitiveness and profitability. The positive sentiment stemming from the US CPI data has further propelled the surge in IT stocks, adding to the already favorable market conditions driven by TCS’s impressive Q1 results.
Impact of US CPI Data on Indian IT Companies: Potential Positive Effect
Avinash Gorakshkar, Head of Research at Profitmart Securities, highlights the potential positive impact of the ease in US Consumer Price Index (CPI) data on Indian IT companies. The decline in the value of the US dollar following the favorable US CPI data implies that Indian IT companies’ charges for their services in international markets would decrease. Since Indian IT companies primarily engage in service exports, the decline in the US dollar could potentially stimulate order inflows and have a positive effect on the Indian IT industry as a whole.
The weakening US dollar enhances the competitiveness of Indian IT companies, making their services more attractive to clients in international markets. As a result, there is a possibility of increased demand for IT services from these companies. The positive impact stemming from the slide in the US dollar may lead to a boost in order inflows for Indian IT companies, thereby contributing to their overall growth and performance.
TCS Share Price Target and Recommendations
According to Vaibhav Kaushik from GCL Broking, the TCS share price has established a new trading range of ₹3200 to ₹3750 following the company’s results in the first quarter of the current financial year. He suggests that any downward movement in the share price should be seen as a buying opportunity for long-term investors who hold a positional outlook. He advises existing TCS shareholders to maintain the stock and set a stop loss at ₹3200.
However, for fresh investors considering an entry into TCS, Kaushik recommends waiting for the management’s guidance before making any investment decisions. By doing so, investors can gain a better understanding of the company’s future prospects and align their investment strategies accordingly.
TCS Q1 Results 2023: Consolidated Net Profit Rises YoY, Sequentially Down
Tata Consultancy Services (TCS) Ltd, a prominent IT services major, has reported its consolidated net profit for the first quarter ended June (Q1FY24). The company witnessed a year-on-year (YoY) rise of 16.84 percent in its consolidated net profit attributable to shareholders, reaching ₹11,074 crore. In the corresponding period of the previous fiscal year, TCS had reported a profit of ₹9,478 crore. However, sequentially, the consolidated net profit experienced a decline of 2.8 percent.
The YoY increase in consolidated net profit showcases TCS’s continued growth and profitability, highlighting its ability to capitalize on market opportunities and deliver value to its shareholders. Despite the sequential dip in net profit, it is important to consider the broader financial performance of the company and its overall trajectory.
Wipro Q1 Results 2023: Anticipated Weak Quarter in Line with Industry Peers
Wipro Ltd, the fourth-largest Indian IT company, is set to announce its Q1 results for 2023. Following the release of results by industry peers such as TCS and HCL Tech, market expectations suggest that Wipro is likely to report a weak quarter, with a sequential decline in revenue and operating margin.
The anticipated performance aligns with the broader trends witnessed across the IT industry during the quarter. Factors such as the global economic environment, pandemic-related challenges, and supply chain disruptions have influenced the industry’s overall performance, including revenue and operating margins. Wipro, being a significant player in the Indian IT sector, is not immune to these industry-wide dynamics.
