TCS Shares Falling Behind Peers, Tata Group Stocks: What's Dragging Down The IT Bellwether?

News18

15-05-2025

Last Updated:
TCS underperformed in the past year, with its shares falling 10%, trailing key IT peers like Infosys, HCL Tech, and Wipro; Here's why
Tata Consultancy Services Share Price: For years, Tata Consultancy Services (TCS) has stood as the flagship performer of the Tata Group—widely regarded as a symbol of stability, consistent earnings growth, and long-term value creation. However, the IT major has seen its shine dim over the past year. TCS shares have declined 10%, significantly underperforming not only key IT peers such as Infosys (up 12%), HCL Tech (up 24%), and Wipro (up 11%), but also most other Tata Group companies. In contrast, the Nifty IT index has risen over 15% during the same period.
Within the Tata stable, TCS now finds itself trailing most group stocks, with only Tata Motors, Tata Elxsi, and Tata Technologies posting weaker performance.
TCS's performance over the past year, though positive, has been overshadowed by the exceptional gains of other Tata Group companies. Factors such as global economic uncertainties and sector-specific challenges have impacted its growth trajectory.
TCS's recent underperformance stems from a combination of external pressures and internal hurdles. Globally, the tech sector has been navigating uncertainty, with economic slowdowns in key markets like the US and Europe — TCS's primary revenue sources — curbing client spending.
Inflation, elevated interest rates, and geopolitical tensions have further dampened discretionary and transformational IT investments.
On the internal front, TCS has faced client-specific setbacks. The high-profile BSNL contract, once a major revenue driver, is now being scaled down, impacting the company's top line. Additionally, slower deal conversions and delays in decision-making across sectors such as retail, manufacturing, and healthcare have further weighed on revenue growth.
From Leader to Laggard: Why Is TCS Falling Behind Its Peers?
TCS has reported slower deal conversions and prolonged decision-making cycles across key sectors like retail, manufacturing, and healthcare, putting further pressure on revenue growth. Sumit Pokharna, VP–Fundamental Research (IT) at Kotak Securities, pointed out that TCS's management has acknowledged challenges in client spending, particularly in retail, manufacturing, and insurance. 'IT services spending growth is likely to fall below our base-case assumption of 4–5% in FY26, with delays in project executions," he noted.
While TCS has struggled with growth headwinds, its peers have shown stronger momentum. HCL Tech's strategic focus on high-growth areas such as digital transformation and cloud services has delivered tangible results. Infosys continues to maintain robust deal wins, and Wipro's aggressive M&A strategy has helped broaden its client base and geographical reach.
Sushovon Nayak, Research Analyst at Anand Rathi Institutional Equities, told News18: 'Deferrals in client spending—especially in the retail and manufacturing sectors—amid tariff uncertainties, as highlighted in TCS's Q4 FY25 commentary, along with client-specific challenges such as the BSNL ramp-down, have significantly weighed on the company's growth trajectory. These factors have collectively contributed to the stock's underperformance."
He added: 'However, if the US-China trade deal progresses positively, we could witness a revival in discretionary IT spending, which may support improved growth prospects for TCS going forward."
Light At The End Of The Tunnel For TCS?
Following TCS's Q4 FY25 results, analysts at HSBC Securities and Capital Markets (India) noted that US tariffs and Jaguar Land Rover's (JLR) ageing portfolio are likely to weigh on growth in FY26. They warned that margins may disappoint as well.
In the domestic automotive segment, Tata Motors — a key part of the Tata Group — faces continued competitive pressure in the passenger vehicle (PV) market, while the recovery in the commercial vehicle (CV) cycle remains sluggish. With limited near-term catalysts, HSBC downgraded Tata Motors to a 'Hold" rating (from 'Buy"), even as it raised the target price to Rs 770 from Rs 700.
Jefferies India echoed similar concerns, noting that Tata Motors is headed for a challenging year. While Q4 EBITDA declined, it still came in 4% above Jefferies' estimates. The dip was attributed primarily to weaker JLR margins.
'JLR is expected to face headwinds in the coming year due to US tariffs, intensifying competition in China, and rising customer acquisition costs. India's CV demand has also slowed, while the electric PV segment is seeing increasing competition," Jefferies said.
As a result, Jefferies has cut its FY26–27 EBITDA estimates for Tata Motors by 8%, though it raised earnings per share projections by 3–4%. The brokerage retained its 'Underperform' rating, with a revised target price of Rs 630.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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