D-Street Buzz: IT stocks under pressure – TCS, Infosys, Tech Mahindra fall 3% each; Coforge down 6%
Most IT stocks traded lower in intraday trade on April 13, keeping their sectoral index down even as the benchmarks traded with healthy gains.
The Indian equity market, after suffering strong losses on April 12, traded higher with Sensex jumping more than 400 points in morning trade.
Among the sectors, the IT index tumbled over 3 percent dragged by Tata Consultancy Services (TCS), Mindtree, Coforge, Infosys and Tech Mahindra which are down 3-6 percent each.
IT major TCS on April 12 reported a 6.3 percent sequential growth in March quarter consolidated profit at Rs 9,246 crore. The company’s revenue grew by 4 percent to Rs 43,705 crore compared to the previous quarter. The revenue in dollar terms grew by 5 percent sequentially to $ 5,989 million against 5.1 percent growth seen in the previous quarter.
GLobal research firm Citi has a sell rating on the stock and has raised target to Rs 2,935 from Rs 2,870 per share. The valuations were at 31x 1-year forward price in all positives. Citi raise EPS estimates by 2 percent for FY22/23, partly on USD-INR rate but continues to prefer Infosys over TCS, it added.
Domestic research firm Dolat Capital has a reduce rating with a target price of Rs 3,370 per share. “We believe TCS and other Tier-I IT companies will continue to deliver strong revenue momentum over the four-six quarters (translating into double-digit revenue growth) and thus would sustain current valuations of 25x-30x, which implies 3x on PEG basis,” it said.
Shares of Infosys traded lower a day ahead of the company’s March quarter scorecard.
Vikas Jain, Senior Research Analyst at Reliance Securities recommends holding Infosys as the company is scheduled to declare its Q4 results tomorrow. The stock has doubled in the last year with sustained positive price performance on a quarter-on-quarter basis.
Infosys said it would consider a share buyback during a meeting on April 14.
“The board of the company will consider a proposal for buyback of fully paid-up equity shares of the company at its meeting to be held on April 14, 2021,” the company said in its release on the exchanges.
The share price of Tech Mahindra fell 3 percent; it has touched an intraday high of Rs 1,050.00 and an intraday low of Rs 998.85.
Despite the stock rising only 17 percent in the last 6 months, brokerage firm SMC Global Securities has a buy on the stock with a target of Rs 1,180. The stock made a 52-week low of Rs. 490 on May 6, 2020, and a 52-week high of Rs. 1,081.55 on April 9, 2021. The 200 DEMA of the stock on the daily chart is at Rs. 878.93.
“One can buy in the range of Rs 1,020-1,035 for an upside target of Rs 1,150-11,80 with a stop loss below Rs 960,” he added.
Brokerage house Prabhudas Lilladher expects Infosys and TCS to outperform in the tier-1 pack and hence remain its preferred picks. HCL Tech and Tech Mahindra continue to be attractive on relative valuation discount. “We like Mindtree in Tier-II and L&T Technology Services in ER&D space,” it said.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.