Shares of Tata Consultancy Services (TCS) and Infosys have fallen significantly this year amid the underperformance of the Indian IT stocks as analysts see more pain for the sector and a potential slowdown in dollar revenue growth in the face of impending macroeconomic stress. The IT index has been one of the worst hit sectors, falling over 27% so far this year, underperforming benchmark Nifty 50 index.
Top IT company TCS’ shares are trading near its record low level of ₹2,973 apiece on the BSE it had hit in July. The IT stock is down more than 20% in 2022 (YTD) so far. For the quarter ending June 2022 (Q1 FY23), TCS reported a 5% rise in quarterly profit from a year earlier, missing analysts’ estimate, as rising employee costs squeezed earnings even as demand remained robust.
Meanwhile, Infosys shares hit its 52-week low level of ₹1,360 on the BSE in Thursday’s early deals. The second-largest IT services firm, with its stock down about 27% this year, reported a lower-than-estimated 3% rise in June quarter net profit as operating margin declined on rising expenses.
“Both IT stocks are in oversold zone and rupee depreciation is possible as dollar index has once again surged to its record high after hawkish US Fed in interest rate hike. As dip in rupee is favourable for Indian IT companies, strong bounceback in both IT stock is widely expected. But, out of these two stocks, I would suggest investors to buy TCS at current levels maintaining stop loss at ₹2,750 apiece levels,” said Anuj Gupta, Vice President, Research at IIFL Securities.
“Infosys and TCS stocks are at must buy levels for a positional long term investors. Infosys shares have strong support at ₹1,330 apiece levels and its immediate hurdle is placed at ₹1,460 per share levels. Similarly, immediate support for TCS shares is placed at 2,960 whereas its immediate resistance is placed at ₹3,140 apiece levels,” said Mudit Goel, Senior Research Analyst at SMC Global Securities.
India’s top IT services firms have started freezing or cutting staff bonuses, worried that tightening budgets at the US and European clients who are bracing for a recession will sharply hit their own profit as the pandemic-led boom fades out.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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