By Kashish Tandon
BENGALURU (Reuters) – Tata Consultancy Services’ shares gained nearly 3% on Friday, a day after India’s top IT services firm reported first-quarter results that signalled early signs of revival for a sector that has been grappling with sluggish demand.
The gains pushed the IT index up 3.4%, its highest level since January 2022.
“With a return to growth in its key North America market, we think the worst is over,” analysts at Macquarie said.
“(An) Interest rate cut cycle, likely in the second half of the year and a potential thaw in decision making by U.S. corporates post elections in November 2024 could provide fillip to demand,” Nomura analysts said in a note.
High interest rates and geopolitical risks have impacted demand for services from Indian IT companies since fiscal year (FY) 2023. Gobally, clients are cutting discretionary tech spending and awarding smaller deals that have lower margins.
TCS’ growth across all verticals, excluding telecom, coupled with net hiring at a seven-quarter high, are signs of a revival, analysts at Jefferies said.
Chief Executive K Krithivasan in a post-results media call said that he expects FY25 to be better than the previous fiscal, but added that market conditions are quite volatile.
At least 11 brokerages raised their price target on the stock after the results, with the median at 4,309 rupees compared to 4,262.50 a month ago.
The company was last up 3% at 4,043 rupees.
Around five analysts have upgraded their rating “buy” from “hold”. The company’s peer Infosys is also rated “buy”, on average, while Wipro is rated “hold”.
The day’s move drove TCS’ year-to-date gains to more than 8%, compared with a 7.5% jump in the IT index. Its shares had fallen over 1% since reporting quarterly results in April.
TCS’ price-to-earnings (P/E) ratio (last 12 months) of 30.43x is higher than rivals Infosys, Wipro and HCLTech, which traded at a P/E of 25.5x-26.2x, as per LSEG estimates.
(Reporting by Kashish Tandon and Bharath Rajeswaran in Bengaluru; Editing by Sonia Cheema)
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