Shares of Tata Consultancy Services (TCS) plunged more than 4% on Wednesday as the company’s earnings for the second quarter of the current financial year fell short of Street expectations. The scrip closed at Rs 2,483 on the BSE, down by Rs 114 or 4.39%. A total of 45.3 lakh shares changed hands across the stock exchanges – more than three times the 90-day average of 12.23 lakh.
During the quarter under review, the net profit grew 6.1% to Rs 6,055.2 crore while revenues jumped 5.8% on year to Rs 27,165 crore. US-based investment banking firm Morgan Stanley said in a note to investors that mixed Q2FY16 results of TCS have been offset by the strong management commentary.
“According to management, the demand environment remains strong barring a few parts of the business. Latin America grew in 2Q, and is expected to continue to grow in constant currency terms over the coming quarters. TCS recorded strong order booking during the quarter. The order booking in 2Q16 was 30% higher than the highest ever order booking in any quarter historically. Moreover, order booking was broad-based across key verticals and geographies,” said Parag Gupta, vice-president of Morgan Stanley, in the note.
The report however observed that unlike Infosys, the revenue growth of TCS in North America decelerated to 3.1%, which could pose a downside risk to the stock along with decline in revenues from Diligenta, the UK-based insurance subsidiary of TCS.
The decline in TCS shares dragged other IT scrips with the CNX IT index closing down 1.39%. Shares of
Infosys closed 0.3% lower while shares of Wipro declined 0.5%.