TCS share price falls nearly 2% on profit-booking; stock slips 6% from 52-week high

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October 19, 2020 12:40 PM

IT sector is one of those sectors which has got a positive impact due to the pandemic owing to the nature of business. So, the prices already factored in the strong result.

TCS,This collaboration will not only help address many of the challenges faced by modern society but will also further cultivate India-Japan relations and ultimately contribute to the growth of both nations, Gonokami added.

Tata Consultancy Services (TCS) share price fell nearly 2 per cent to Rs 2,710.25 on BSE in Monday’s session and was the top Sensex laggard in the morning deals. Earlier this month, TCS stock price scaled a fresh 52-week high of Rs 2,885 on BSE, since then the stock has fallen 6 per cent. The company reported a nearly 5 per cent rise in consolidated net profit to Rs 8,433 crore in the July-September quarter. The IT sector is one of those sectors which has got a positive impact due to the pandemic owing to the nature of business. So, the prices already factored in the strong result. “Now due to profit-booking, the stock is getting corrected. This will be a very short-term scenario. Once the correction is over, all IT stocks will bounce back,” Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online.

During Q2, the top four Indian IT companies have reported a strong beat on revenues and margin. “IT names are also upbeat on FY21 guidance and resiliency of medium-term technology demand. Additionally, TCS and Wipro have announced a large cash return program through buyback,” Suyog Kulkarni, Senior Research Analyst at Reliance Securities, told Financial Express Online.

Kulkarni said that they are structurally positive on the IT sector in the medium-term as risk-reward is still favorable given IT companies growth resiliency and low capex and high cash conversion business model. The board of TCS also cleared a buyback plan of up to Rs 16,000 crore at Rs 3,000 per share and an interim dividend of Rs 12 per equity share, along with a salary hike for employees from October 1, 2020.

Analysts at Geojit Financial Services in a report highlighted that backed by an $8.6 billion order book, TCS’ growth trajectory remains robust. The roll-out of salary hikes will increase expenses, however, the management is confident of maintaining improved margin levels. “Furthermore, owing to the COVID-19, the digital transformation across sectors have accelerated and this will help TCS to leverage their expertise and gain more business,” they said. TCS’ industry leadership and the gold standard in execution/scale will be supported by industry tailwind of core system modernisation by enterprises.

Analysts Dipesh Mehta and Monit Vyas at Emkay Global Financial Services said that the Sept’20 quarter performance showed a broad-based rebound in revenue growth across industries and geographies after weak Q1. It saw a rebound in demand for customer & employee experience, supply chain resilient operations, automation and security.

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