TCS share price fell more than 3% to 3,483, falling below its 52-week low. Most of the IT stocks fell badly in today’s trading session; Infosys share price fell 4.34%, Tech Mahindra share price fell 6.3%, HCL Tech share price fell 3.32%, and Wipro’s share price fell more 5.5%. One of the largest indexes in India, Nifty IT, fell more than 4.1%, one of the biggest falls in recent years.
The share price of India’s leading IT firm and one of the heavyweights in the Nifty 50 index, TCS, is down more than 7.75% in the last week and more than 22.5% in the last 6 months. With the IT behemoth touching a new 52-week low, questions of how much more the stock can fall are doing rounds. So, let’s answer the question with the help of necessary data and see whether investing in these levels will reward investors.
TCS share price performance
A significant 7.75% fall this week in Tata Consultancy Services is due to a feared slowdown in the US economy (a key market for TCS). The US economy struggled as consumer confidence hit a multi-year low and jobless claims spiked. Concerns of inflation returned to haunt the street as President Trump’s tariff war with other countries is expected to weigh in on commodity prices in the country. Inflation in the US was already above the Fed’s favorable mark of 2%, but this trade war could jeopardize the Fed’s efforts to keep it in check.
The stock underperformed benchmarks as well as its peer index. In the past month, it underperformed the market by falling 11 per cent as compared with the BSE Sensex, which was down 1 per cent, and the BSE IT index, which slipped 6.7 per cent. Not just the Nifty IT index, but TCS has also underperformed its peers such as HCL Tech and Infosys.
TCS had a compounded sales growth of 11% and Compounded Profit Growth of 9% in last 10 years. Similarly, Infosys has a compounded sales growth of 12% and Compounded Profit Growth of 9%. In comparison, HCL Tech has a compounded sales growth of 16% and Compounded Profit Growth of 15% in the last 10 years. So, HCL Tech’s stock has also outperformed TCS and Infosys and is up at a CAGR of 12% compared to the 11% CAGR of Infosys and 10% of TCS in the last 10 years.
Though the street is fearful of fluctuating demand trend for TCS going ahead, but management is cautiously optimistic. In Q3 conference call, the company’s top management pointed out that:
- Customer priorities focused on cost optimization and business transformation.
- Significant growth observed in GenAI, AI, and cloud services.
- Early signs of revival in discretionary spending noted in BFSI and Retail.
- Expectations of client IT budgets remaining stable with a positive bias for CY’25.
- Management expressed cautious optimism for CY’25, anticipating better performance compared to CY’24 despite the tapering off of the BSNL contract.
In terms of challenges and headwinds, management pointed out that:
- The management acknowledged the impact of unresolved geopolitical issues, trade wars, and uneven growth forecasts as potential headwinds.
- The BFSI sector is experiencing operational efficiency demands, with ongoing modernization initiatives.
- Declines in specific sectors such as Communication and Media, Life Sciences, and Manufacturing were noted, with expectations for stabilization and recovery in the medium term.
The management is optimistic about future growth driven by strong deal wins and a robust pipeline. Some sector-specific challenges are there, but the green shoots are more visible than before. Management expects to mitigate the impact of the tapering BSNL contract through new opportunities and improved discretionary spending.
TCS Share price outlook
The next big support for TCS is in the 3,300 and 3,350 range, and the next is in the 2950-3000 range. TCS’s technical setup is weak, as the stock has been falling continuously for more than 10 days and touching new lows every day. The stock of TCS is below all short and long-term moving averages, Today, it broke below the 200d exponential moving average; last, it broke below the 200d E moving average in the fall of Covid.
In such volatility, investors should look for stabilization, at some good candle formations, and breakouts before adding in some new quantity. The stock may be at a mouth-watering level for long-term investors, but taking a little technical help (charts) can sweeten the deal.
Fundamentals of the stock and current valuation
The stock of TCS is trading at a 25.4x FY25 EPS (estimated full year EPS of 137). It is at a discount to the median P/E of stock, which is at 31x. Risk reward is very good for the stock, and investors should either add the stock in a staggered way (through SIPs) or watch technical levels above mentioned before adding in. As discussed above, the fundamentals of the stock are great, and growth normalization is happening. So the stock should be on investors radar.
With the analysts/experts covering TCS stock, the consensus recommendation is “BUY” (16 strong buy calls, 12 buy calls, 10 hold calls, and 3 sell calls) with a median target of 4,501 (more than 30% upside from current levels).
Please note this is not a buy/sell reco; please contact a registered IA before making any buy/sell decisions.
