Shares of Tata Consultancy Services (TCS) rose 3% in early trade on July 13 to hit an intraday high of Rs 3,360 on NSE even after the company posted a muted set of earnings for the quarter ended June. The optimism for the stock arises from the fact that most brokerages remain positive about the long-term prospects of the information technology major
HCL Tech shares fell in early trade as the company's Q1FY24 earnings failed to meet the expectations of the company as well as of the Street. The stock, however, recovered and was rose marginally to hit an intraday high of Rs 1,124.40 on NSE after reports that HCL Tech has signed a definitive agreement to acquire 100% equity stake in ASAP Group, a Germany-based automotive engineering services provider for a deal valued at 251.1 million euros (Rs 2,206 crore) by September 2023
After TCS' Q1FY24 results, brokerage firm JP Morgan has slashed its target price for the stock to Rs 2,650 from Rs 2,700 while retaining its 'underweight' call to factor in the subdued earnings. Nomura has a slightly more bearish outlook for TCS as it maintained its 'reduce' rating for the stock, with a price target of Rs 2,800 per share
Jefferies sees TCS' premium valuation limiting its upside potential. On that account, the foreign brokerage has a 'hold' call for TCS, with a price target of Rs 3,450. Meanwhile, domestic brokerage Motilal Oswal Financial Services has a positive view on TCS share from a long-term perspective. It has a 'buy' call for the IT major, with a price target of Rs 3,790 per share
JPMorgan has maintained an ‘Underweight’ rating on the HCL tech stock with a target price of Rs 900 per share. Another international brokerage Jefferies has maintained a ‘Hold’ rating on the stock with a target price of Rs 1,205 per share. Nuvama Institutional Equities has retained a ‘Buy’ rating on the stock but cut the target price to Rs 1,300 from Rs 1,340 earlier
Domestic brokerage house Motilal Oswal Financial Services believes HCL Tech shares are currently trading at an inexpensive valuation, and any near-term correction due to the Q1 miss should make it even more attractive. It reiterated a ‘Buy’ rating on the stock with a target price of Rs 1,280 per share
While Both TCS and HCL Tech shares are expected to remain subdued in the short term, analysts appear to be favouring TCS for the short term. As per Siddharth Bhaisora, Investment Advisor at Wright Research, "Investors may want to hold onto or even increase their positions in TCS given its robust order book, and its focus on innovation and emergent technologies, which could potentially drive future growth." Meanwhile, HCL Tech also has potential upside in the long term
According to share market analysts, TCS is capable of navigating through turbulent times with economies of scale, a larger and deeper client base, and the ability to negotiate deals better due to its varied technological bandwidth. TCS may look relatively expensive compared to HCL Tech, but the premium is justified given the strong visibility emanating from the larger deal pipeline and the leadership position in the industry, according to Dhruv Mudaraddi, Research Analyst at StoxBox
"TCS shares are currently trading sideways, with critical support found around the Rs 3,000 mark and resistance seen around the Rs 3,500 level. HCL Tech has support identified around the Rs 1,000 mark and resistance anticipated around the Rs 1,160-1,170 zone. Investors are encouraged to trade with caution as IT equities, in general, may experience volatility in the coming days," said Aamar Deo Singh, Head Advisory at Angel One
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