TCS slumps 33% from peak. Is the correction an opportunity in disguise?
ADVERTISEMENT From a technical standpoint, the stock is under significant pressure.
'TCS has broken below a rising trendline on the weekly chart with strong volumes, which signals intensified selling pressure,' said Mandar Bhojane, Equity Research Analyst at Choice Broking. 'The RSI is down to 28.8, which puts the stock in oversold territory, but the downward trend remains intact for now.'
Bhojane advises investors to wait for signs of a reversal before entering. He sees immediate support at Rs 3,000 and Rs 2,800, with a potential upside to Rs 3,500–3,800 if a recovery sets in.Drumil Vithlani, Technical Analyst at Bonanza, also points out that TCS is nearing its October 2022 lows — a critical support zone. 'Long-term investors can consider staggered accumulation between Rs 3,060 and Rs 3,000 with a stop loss at Rs 2,900. The next bounce, if it comes, could aim for Rs 3,270 and Rs 3,415,' he said.
ADVERTISEMENT TCS reported a net profit of Rs 12,760 crore for Q1FY26, up 6% year-on-year and above Street expectations. Revenue rose 1.3% YoY to Rs 63,437 crore, but the constant currency figure declined 3.1%, mainly due to a sharp ramp-down in the BSNL contract.Margins expanded 30 bps sequentially to 24.5%, and net cash from operations was a healthy Rs 12,804 crore — 100.3% of net income. Attrition stood at 13.8%, indicating a relatively stable workforce environment.
ADVERTISEMENT Still, the BSNL hit and ongoing macro uncertainties led to a 0.5% sequential dip in international business, a concern highlighted by several brokerages.
ADVERTISEMENT Investor sentiment took another hit after TCS announced plans to lay off over 12,000 employees, 2% of its workforce, citing AI-led disruptions and weak demand in certain verticals. The layoffs, largely affecting mid- and senior-level staff, are part of what the company describes as a move toward becoming a 'future-ready' organisation.This follows criticism over TCS's newly revised 'bench policy,' which puts employees under greater pressure to remain billable. Industry-wide, hiring has slowed dramatically, the top six IT firms added just 3,847 people in Q1, down 72% from the previous quarter.
ADVERTISEMENT Despite the bearish chart setup and recent workforce cuts, most brokerages remain bullish on TCS, pointing to its attractive valuations and strong fundamentals.Motilal Oswal maintained a Buy with a Rs 3,850 target, noting that execution on BSNL remains a concern, but margin expansion and cash flows are encouraging.Nuvama revised its target slightly down to Rs 3,950 but expects growth to pick up as macro conditions improve.Antique and Nomura both lowered their targets marginally but still see upside from current levels, citing long-term visibility and cost control.TCS is in a tough spot, technically weak, but fundamentally stable. While short-term momentum may continue to be negative, analysts believe long-term investors could benefit from staggered accumulation at key support levels.The question isn't whether TCS is struggling now; that's clear from the price. The bigger question is whether the correction has gone too far relative to the company's core strength.If the fundamentals hold, and the global tech cycle improves, this may indeed be one of those moments where fear creates opportunity.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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