More Stories

Informist, Thursday, Jan. 9, 2025

By Alina Geogy

MUMBAI – The strong deal wins by Tata Consultancy Services during the December quarter, followed by positive management commentary, encouraged traders to place bullish bets on the stock's derivatives contracts. Traders covered their short positions aggressively after analysts expressed bullish views following the deal wins. Premiums nearly doubled for in-the-money and at-the-money call options of the company, while those on puts fell sharply.

There has been fresh buying and also some short covering in Tata Consultancy Services, Anshul Jain, head of research at Lakshmishree Investment and Securities, said. The trend for the stock is bullish now as per the charts, with the target price seen at INR 4,475. This target implies an upside of nearly 5% from Friday's close.

Shares of Tata Consultancy Services closed 5.6% higher at INR 4,265.65 Friday. This is the stock's highest single-day gain since Jul. 12, when the stock rose 6.6% after its June quarter earnings. With these gains, the stock outperformed all other constituents in the Nifty 50 index Friday.

The short covering in the stock's derivatives indicates traders' shift to bullishness from the earlier bearish sentiment. The market had expected the company to post muted earnings for the quarter amid continuous headwinds from furloughs and a decline in revenue from Bharat Sanchar Nigam Ltd. But, the company Thursday reported a consolidated net profit of INR 123.80 billion for the December quarter, slightly higher than the average of analysts' estimates of INR 122.74 billion. The company also said its total contract value rose to $10.2 billion as of Dec. 31, from $8.6 billion three months ago.

While the bottom line of Tata Consultancy Services for Oct-Dec grew 4% sequentially, its revenue for the quarter fell slightly more than analysts had expected. Chief Executive Officer and Managing Director K. Krithivasan, in a post-earnings press conference, said the revenue for the December quarter was hit by seasonal headwinds and soft demand for discretionary services.

However, the company is seeing early signs of a revival in discretionary spending, Krithivasan added. "Commentary on early signs of revival in discretionary spend in some verticals is positive and is likely to set a good undertone for CY25 (2025)," Shaji Nair, research analyst, capital market strategy, at Mirae Asset Sharekhan, said in a note Thursday after the results.

The bullish sentiment for the stock will be strengthened after peer Infosys reports its quarterly results, which are also expected to be good, analysts said. If Infosys's results meet the market's expectations, the entire sector may benefit and see a healthy run-up in the near term, they said. The open interest for Tata Consultancy Services has increased by 4.5% on the long side, and by 2.5% for Infosys, Jain said.

Meanwhile, traders continued to add short positions in the derivatives segment of the Nifty 50. The highest open interest additions were seen in the 23500-24000 strike prices for the call options of the Nifty 50 expiring next week. This indicates that this zone would offer resistance to the spot index in the near term, with 23500 points being the immediate resistance for the index. Interestingly, 23500 points was seen as strong support for the Nifty 50 this week, until the index plunged below this level Friday. The Nifty 50 had fallen to a one-month low of 23344.35 points during the day's session and closed at 23431.50 points, down 95 points or 0.4%.

On the put side, traders added the most short positions to the 22000, 22400, and 23400 strike prices of the Nifty 50 expiring Thursday. The maximum open interest on the put side was at 22000 points.

The January futures contract of the Nifty 50 closed at 23515 points, which is at a premium of 83.50 points to the spot index. Open interest in the contract rose nearly 2% to 13.88 million, according to provisional data.

--Nifty 50 Jan closed at 23515, down 133.10 points

--Nifty 50 Feb closed at 23653, down 136.30 points; 221.50-point premium to spot index

--Nifty 50 Mar closed at 23815, down 134.05 points; 383.50-point premium to spot index
 

Tata Consultancy Services, Infosys, HDFC Bank, Reliance Industries, State Bank of India, ICICI Bank, HCL Technologies, Tata Motors, and LTIMindtree were the most actively traded underlying stocks Friday.  End

Edited by Rajeev Pai

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.