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- Infosys, TCS, Wipro, LTI Mindtree and TechMahindra were the top gainers on NSE in Friday trade.
- TCS reported better than expected earnings, while Infosys earnings were in-line with expectations.
- Wipro is set to declare its third quarter earnings on Friday evening.
Five top tech stocks – Infosys, TCS, Wipro, LTI Mindtree and TechMahindra were the lead gainers on NSE in the Friday morning trade. All the IT stocks picked up after the two leading companies in the sector – TCS and Infosys – declared their earnings onThursday evening.
TCS reported 1% sequential revenue growth above expectations of a flat growth. Its EBIT margins however hit a seven-quarter high even as its deal wins remained moderate at $8.1 billion, missing its guidance. But it also signalled a possible bottoming out of stress in the key segment of banking, financial services and insurance (BFSI) segment.
“Management (of TCS) alluded to a macro environment similar to last quarter, with the long-term demand environment remaining strong. It called out its BFSI vertical bottoming out – a big read across for the entire sector, in our opinion,” said a report by Nuvama.
The tech major surprised the street in a seasonally weak quarter, with an impact of furloughs. “We were expecting a flattish revenue growth in rupee terms while the company reported earnings that came above the expectations. The best thing is despite a seasonally weak quarter with macro-economic headwinds, TCS performed very well on most earnings parameters,” said Prashanth Tapse, senior VP of research at Mehta Equities.
Infosys reported a 1% sequential decline in constant currency, which was lower than the 2% decline that the street expected. The Bangalore-based tech major shaved off its FY24 revenue guidance for the second time, to 1.5-2%. Yet, brokerages see positive levers.
“Strong order book will result in acceleration in growth beyond FY24 as Infosys expects ramp up of many large deal wins of 9M from later part of 4Q. We continue to believe that Infosys’s FY24 growth lag is transient and will likely bounce back in FY25 unless new major adverse macro events unfold in US/Europe,” says a report by Equirus Securities.
Wipro will declare its Q3 earnings on Friday evening.
| Stock | % change |
| TCS | 3.72% |
| Infosys | 7.14% |
| Wipro | 4.34% |
| HCL Tech | 2.96% |
| Tech Mahindra | 4.59% |
| LTI Mindtree | 3.72% |
Source: NSE (as of 10:30 am)
Lack of bad news is good news
The worst is far behind for the IT sector whose fortunes depend on clients from the US and Europe. In terms of new deal wins, companies insist that little has changed in terms of sentiment in spite of the US Fed pausing interest rate hikes.
However, the global macroeconomic situation has not deteriorated since the last quarter, which is being taken as a positive sign.
“Even though there is no positive message from the management commentary, the market is likely to respond positively to the absence of any bad news. But the upside for TCS and Infy will be limited since it will take time for clarity to emerge on the prospects for the sector in FY25,” said Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services.
On Friday morning, the benchmark indices rallied with support from buying in tech stocks. The Nifty IT index went up by 0.7%, while Nifty and Sensex were higher by 0.8% each.
$INFY.NSE Positive traction with the IT sector this morning, lead by Infosys. #Earnings + #acquisition news the catalyst for a potential trend. The stock is a buy at CMP 1,590 with a stop loss around 1,515 targeting 1,730 and 1,800.
— (@ramaiyavipul) January 12, 2024
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