TCS share price experienced a decline on April 9th, preceding the release of its Q4FY25 results. This article provides a comprehensive analysis, incorporating expert opinions, to guide investors on whether to buy, sell, or hold the IT stock.
Tata Consultancy Services (TCS) witnessed a downturn in its share price on Wednesday, April 9th, as investors braced themselves for the IT giant's fourth-quarter results. Opening at ₹3,276 against the previous close of ₹3,293.55, the stock slid by 2.4% to reach ₹3,215.90 during the trading session. By 2 PM, it was trading 1.12% lower at ₹3,256.65.
TCS Q4 Result Preview: Mixed Expectations
Analysts anticipate a mixed bag of earnings for TCS in Q4FY25, influenced by ongoing regulatory and economic uncertainties. Concerns about a weakening macroeconomic environment loom, potentially impacting the IT sector's Q4 results and guidance for the fiscal year 2026. Motilal Oswal Financial Services projects a revenue decline of 0.5% quarter-on-quarter (QoQ) in constant currency (CC), attributed to the BSNL ramp-down.
While Motilal Oswal expects the Banking, Financial Services and Insurance (BFSI) sector to remain robust for TCS, manufacturing is predicted to be somewhat weaker. "EBIT margin may remain flat QoQ, aided by operational efficiencies, despite headwinds from talent investments. Q4 margin should be aided by BSNL tapering and pyramid benefits from early hiring in Q1 and Q2," the brokerage firm stated.
Kotak Institutional Equities forecasts flat constant-currency revenues for the international business, coupled with a $30 million reduction in BSNL revenues. Overall, constant-currency revenues could decrease by 0.3%. "We expect steady deal wins of $11 billion, a decline from $13.2 billion last year, which included certain large renewals,", Kotak added.
Tariff Challenges and Market Outlook
Experts highlight the challenges confronting the Indian IT sector, including trade war implications and a cautious outlook on US economic growth. Despite these headwinds, TCS, as the country's largest IT player, is expected to weather the storm. Investors are advised to pay close attention to management's commentary following the Q4 results before making investment decisions.
Atul Parakh, CEO of Bigul, noted, "TCS is poised to announce its Q4 FY25 earnings on April 10, with expectations of modest revenue growth and margin expansion. However, the IT sector faces challenges due to tariff-related uncertainties and a cautious outlook on US growth." He further emphasized that "TCS remains a key player in the Indian IT sector, and its performance will set the tone for the industry's earnings season. Small improvements are anticipated due to operational efficiencies offset by talent-related costs. Future guidance will be crucial in determining investor sentiment and stock price movement."
A significant portion of TCS' revenue originates from North America, making tariff-related uncertainty a major concern for the stock.
VLA Ambala, a Sebi-registered analyst and co-founder of Stock Market Today, emphasized TCS' reliance on consultancy services and its dependence on North America for 47.7% of its revenue. The UK contributes 16%, India 9%, Asia-Pacific and the Middle East 7.8%, and Europe 13.9%. "This is why I believe we may see the impact of the current tariff reflected in the company's upcoming financials and balance sheet," she commented.
Investment Strategies: What Should Investors Do?
Ambala suggests TCS presents swing trading opportunities. For investors with a longer-term outlook (over two years), trading during dips of 10% is recommended. In such scenarios, two strategies are viable:
- Neutral Options Strategy: Buying at-the-money calls and puts, anticipating a movement of 5-7% within a few weeks.
- Terrestrial Traders: Initiating long positions covered with puts to capitalize on potential upside movements directionally.
"I would like to remind you that hedging is crucial in every condition, especially amid the tariff threat and volatility, as TCS relies almost 50 per cent on the global market, primarily the US, for its revenue source," Ambala cautioned.
Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, pointed out that TCS is currently trading near a key support zone aligned with the 50% Fibonacci retracement level from the COVID March 2020 low (around ₹1,506) to the August 2024 high (approximately ₹4,592). This zone coincides with a previous demand area, adding to its significance. Furthermore, a bullish divergence is visible on the daily RSI, potentially indicating a reversal.
[Insert Image of TCS Technical Chart Here - Caption: TCS Technical Chart - Source: Anand Rathi Share and Stock Brokers]
"If TCS closes above ₹3,400, an upward move toward ₹3,700 is expected. Conversely, a weekly close below ₹3,050 may trigger further selling pressure and create panic in the stock. Traders should watch these levels closely for confirmation," Patel advised.
Ravi Singh, SVP of Retail Research at Religare Broking, noted that the stock has tested its major support at ₹3,000. He anticipates the "sell on rise" trend to persist. "Investors who have prior holdings can maintain strict stop loss at ₹3,000 while traders can initiate a 'Vega positive strategy' which would involve selling ATM put option for current expiry (24 Apr) and buying ATM put option for next month expiry (29 May). This will create a long-put calendar," he stated.
Disclaimer: This analysis is intended for informational and educational purposes only and should not be considered financial advice. Market conditions are subject to change, and investors should consult with qualified financial advisors before making any investment decisions.
