TCS vs Infosys vs HCL Tech: Which large-cap IT stock could deliver better returns in near term?

Information Technology (IT) stocks have delivered better returns so far this year, outperforming the benchmark BSE Sensex. The BSE IT index has climbed up to 5.39 per cent as of Wednesday, compared to a 2.33 per cent decline in Sensex. This comes even as the said stocks witnessed selling in the past few trading sessions. Select frontline stocks such as Tata Consultancy Services (TCS), Infosys and HCL Technologies have gained 4.66 per cent, 2.51 per cent and 5.12 per cent, respectively, on a year-to-date (YTD) basis.

Shares of TCS today extended their fall for the fourth consecutive session and closed 1.42 per cent lower today. TCS has slipped 3.69 per cent in the past five days. Infosys and HCL Tech fell for the second straight day. Infosys lost 1.06 per cent, while HCL Tech declined 1.18 per cent today.

Indian IT services companies have seen mixed revenue growth in the December 2022 (Q3 FY23) quarter due to macro headwinds, said Sumit Pokharna, Research Analyst and Vice-President at Kotak Securities.

"Going forward, we expect modest revenue growth and modest improvement in EBIT margins for all IT companies over FY2023-25E. We expect FY2024E net profits of large IT service companies to grow by 13 per cent in line with historical growth rates. However, we do not rule out downside risks to both revenues and EBIT margins given a likely slowdown in the US and Europe, the key geographies for the Indian IT companies. We are bullish on Infosys, HCL Tech, Tech Mahindra and TCS in large cap. In Tier-II, we like Mphasis. However, we do not prefer Wipro," Pokharna stated.

On the technical front, TCS surpassed its six-month consolidation channel on weekly charts, so investors can buy on dip with a stop loss of Rs 3,350 for a target price of Rs 3,650, said Ganesh Dongre - Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers.

For Infosys, there is still some steam left on the upward bias, Dongre said. Traders can hold and buy on dip this stock, keeping a stop loss placed at Rs 1,510 for a short-term target of Rs 1,650, he added.

Dongre further suggested that one can book profit in HCL Tech now and wait for a lower level to enter again.

Ravi Singh, Vice-President and Head of Research at Share India, said, "HCL Tech, TCS and Infosys are showing strength on the daily and weekly charts. The momentum indicators are lying in the 'Buy' zone suggesting a strong move ahead. In the near term, HCL Tech may touch Rs 1,180 level, TCS around Rs 3,600 level and Infosys may hit the 1,800 level."

Ravi Singhal, CEO at GCL, said, "All large-cap IT stocks look under consolidation. So, buy on dips and sell on the rise." Singhal also stated that target prices for TCS, Infosys and HCL Tech could be Rs 3,620, Rs 1,777 and Rs 1,222, respectively.

Indian equity benchmarks fell sharply today, extending their losing run for the fourth straight session. The domestic indices were dragged by banks, financial, technology and energy stocks. The 30-share BSE Sensex pack dived 928 points or 1.53 per cent to settle at 59,745; while the broader NSE Nifty index moved 272 points or 1.53 per cent down to close at 17,554.

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