How to trade TCS stock ahead of Q1 earnings


NEW DELHI: Tata Consultancy Services (TCS) is likely to report a 4.3 per cent sequential drop in net profit at Rs 6,065 crore for the quarter ended June 30, according to analysts polled by ET Now.

The results will be announced after market hours on Thursday.

The stock has been an underperformer since the March quarter results. It delivered flat return sinceApril 1, compared with a nearly 10 per cent rise in the S&P BSE Sensex.

The June quarter results are unlikely to provide any positive momentum to the stock. Earnings before interest and tax (EBIT) in Q1 is expected to fall 2.62 per cent QoQ to Rs 7,230 crore, compared with Rs 7,425.19 crore reported for the year-ago period, the ETNow poll showed.

According to consensus estimates of analysts polled by ET Now, the country’s largest IT company by sales is likely to report 3.04 per cent quarter-on-quarter growth in revenues at Rs 29,350 crore while dollar revenues may rise 4.1 per cent to $4,381 million, led by core developed markets.

“Unlike its peer group company Infosys, this counter is trading way below its lifetime high registered in October 2014. It is a complete underperformer and at best can be a trading buy,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory,, told

The stock is down a little over 10 per cent from its 52-week high of Rs 2,769 in October 2015. TCS is trading at a PE of 21.55 times compared with 17.35 times of Infosys and 16.46 times of HCL Technologies.

TCS has been moving in a broad range over the past four months, with support at Rs 2,400 and resistance at Rs 2,677. It is trading above its 200-DMA placed at Rs 2,450, but below its 50-day EMA placed around Rs 2,546.

The stock has hit a low of Rs 2,403 on July 8, 2016 and saw a steady pullback. This pullback from Rs 2,403 is now placed just above its 200-day EMA of Rs 2,480.

Usually, Infosys kickstarts the IT results. This is for the first time that TCS will be announcing the numbers before Infosys. The impact of the results of both companies will be visible in Friday’s trade.

In the last two quarters, the stock has always closed in the positive territory in reaction to its quarterly numbers with an average return of over 1 per cent. A trader should not hope for a blockbuster rally on the counter either ahead of the results or after that.

“Usually, we see high volatility around the results of both the companies. However in the recent past, the stocks have seen a good amount of correction post the Brexit vote, even factoring in the negatives,” JK Jain, Head- Technical & Derivatives Research, Karvy Stock Broking told ET

Here’s how to trade the stock ahead of Q1 results:

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory,
Traders can initiate long positions around Rs 2,440 level with a stop loss below Rs 2,400 on a closing basis for an initial target of Rs 2,560. However, if it stabilises around Rs 2,400 level, a higher logical target of Rs 2,622 can’t be ruled out.

Birendrakumar Singh, AVP – Technical Research at Systematix Shares & Stocks
Traders can look at buying TCS at the current price for a target of Rs 2,600-Rs 2,650, keeping a strict stop loss at Rs 2,400. Over the past four months, the stock has formed a broad range, with support at Rs 2,400 and resistance at Rs 2,677.

The RSI and Stochastic oscillator on the daily charts have given positive signals. This indicates that the stock is likely to move towards the higher level of the range placed at Rs 2,677.

Technically, TCS can be bought with a strict stop loss at Rs 2,400, and one can look to exit around Rs 2,600-2,650 levels. The long-term trend would turn positive only if it closes above Rs 2,677 after the earnings.

If it fails to move above Rs 2,677 post result, the strategy would be to trade TCS in this broad range of Rs 2,400-Rs 2,677 levels.

JK Jain, Head- Technical & Derivatives Research, Karvy Stock Broking
TCS has been trading in a broad range between Rs 2,200 and Rs 2,840 over the past two years. “We expect this range-bound move to continue in the coming few months as well. TCS has seen accumulation of short positions. Investors who hold TCS can lighten up positions on rallies post the results as upside would be capped for the stock at Rs 2,600-2,650 levels,” Jain said.