Informist, Tuesday, Feb 27, 2024
By Anjana Therese Antony
MUMBAI – Positive views from global broking firm UBS gave wings to the equity spot and derivatives sides of Tata Consultancy Services, which closed as the second-top gainer in the Nifty 50 today. The stock, which traded in the red in the last two consecutive sessions, rose nearly 123 rupees, or 3%, to a high of 4,124 rupees today. UBS raised its stock rating, target price, and earnings-per-share estimate for TCS and said it sees enough drivers to deliver industry-leading growth and margins.
Some analysts expect "the UBS cheer" to continue for the next few sessions. Immediate support for the stock is pegged at 4,000 rupees and resistance at 4,200 rupees.
UBS upgraded the stock to 'buy' from 'neutral' and raised the target price by 650 rupees to 4,700 rupees. This is nearly 596 rupees higher than today's closing price of 4,104.40 rupees. It also raised the earnings-per-share estimate for the company by 3% for the next financial year and 9% for 2025-26 (Apr-Mar). The broking house also said the company's gross margin could expand by more than 100 basis points in the next four to six quarters, driven by a likely sharp drop in attrition. Key drivers of the company's growth would include large deals, a revival in the banking, financial services and insurance space, and cloud migration, according to the broking firm.
On call contracts expiring on Thursday, premiums for strike prices at and above 4,100 rupees rose. At this level, the premium rose over 18 rupees to 31 rupees, and it had the second-highest concentration of open interest. For the same strike price of contracts expiring on Mar 28, the premium rose over 42 rupees to 127.75 rupees. Further, for the 4,200-rupee strike expiring on Thursday, the premium increased 3 rupees to 7.15 rupees and this level had the maximum concentration of open interest. This is the immediate resistance for the stock, a technical analyst at a domestic broking firm said.
On the puts front, the premium of the 4,100-rupee contract expiring on Thursday declined significantly by nearly 77 rupees to 28 rupees. The premium of the 4,000-rupee strike dropped over 29 rupees to 6.35 rupees. This level has the maximum open interest addition as well as concentration. It acts as strong support for the stock, a technical analyst said.
Among futures, the February contracts of TCS rose 95 rupees, or 2.4%, to 4,102.35 rupees. Open interest rose nearly 24% to 10.50 mln. Today, nearly 3 mln shares of the company changed hands on the National Stock Exchange, 114% higher than on Monday. Gains in TCS also led to a similar rise in other IT stocks, which helped the choppy market turn positive in the second half of the session. The rise in IT stocks together contributed to over 0.1% gains in the Nifty 50, which closed over 76 points, or 0.3%, higher at 22198.35 points.
Last week, the company's Managing Director and Chief Executive Officer K. Krithivasan said he expects the next fiscal year to be better than the current one, as weakness in some industry verticals of the company had bottomed out. TCS reported very slow growth in its revenue in the previous three quarters, compared to the same period in the previous two financial years.
--Nifty 50 Feb closed at 22196.50, up 54.85 points; 1.85-point discount to spot index
--Nifty 50 Mar closed at 22341.10, up 49.30 points; 142.75-point premium to spot index
--Nifty 50 Apr closed at 22485.00, up 49.30 points; 286.65-point premium to spot index
HDFC Bank, ICICI Bank, Reliance Industries, State Bank of India, Tata Motors, Tata Consultancy Services, Axis Bank, Bajaj Finance, Kotak Mahindra Bank, Larsen & Toubro, Vodafone Idea, and Shriram Finance were the most actively traded underlying stocks today. End
Edited by Avishek Dutta
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