TCS share price jumps over 2% ahead of Oct-Dec quarter results; large deal wins, outlook on margins eyed

TCS share price jumped over 2 per cent to Rs 3,098.35 apiece today on BSE ahead of October-December quarter earnings. Earlier this week, Tata Consultancy Services stock price hit a 52-week high of Rs 3,114.45 per share. The Information Technology (IT) sector has been among one of the best performing sectors in FY21. The Nifty IT index has surged nearly 2 per cent to 25,727.10 levels. According to an analyst, generally, Q3 is a slack quarter for IT companies. AR Ramachandran, Co-founder & Trainer, Tips2trades told Financial Express Online that this time, investors are expecting the best quarterly performance from TCS along with other companies like Infosys, HCL Technologies and Wipro with dollar revenue growth of over 3% as against 1%.

According to Suyog Kulkarni, Senior Research Analyst, Reliance Securities, Nifty IT is likely to enjoy premium valuation versus broader market, driven by mid-term growth visibility, stable margins and consistent cash return policy.

Analysts at JM Financial Services expect a 2.3 per cent sequential growth with a 50 bps cross-currency gain. “We are building in a sequential EBIT margin contraction of 80 bps due to wage increments implemented from Oct 1 and slight INR appreciation. According to the domestic brokerage firm, key things to watch out for would be large deal TCV, outlook on CY21 client spending, and outlook on margins over the medium term.

Ramachandran also said that technically, if earnings remain as estimated, then he believes that it has been factored in the stock price. “Investors are advised to book profits on every rise,” he said.

From the 52-week low of Rs 1,504.40 apiece, TCS stock price has more than doubled, rising 106 per cent. Analysts at ICICI Securities expect Indian IT sector to deliver strong sequential revenue growth led by fewer-than-usual furloughs, and residual recovery from Covid decline over H1CY20. It also believes that product-related seasonality/large deal ramp-ups too should help in some cases and margins may remain stable.

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Asian stocks grind lower as focus shifts to Georgia Senate runoff

Asian shares edged lower on Tuesday amid uncertainty about Senate runoffs in Georgia, which could have a big impact on incoming U.S. President Joe Biden’s ability to pursue his preferred economic policies.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.05%, pulling back from a record high. Australian stocks fell 0.26%. Chinese shares erased early losses and rose 0.52%. In Hong Kong, China Mobile, China Unicom, and China Telecom rallied by more than 6% after the New York Stock Exchange abandoned plans to delist the companies’ shares from its bourse.

Japanese shares lost 0.34% after a spokesman said the government will reach a decision on a state of emergency for Tokyo and surrounding cities on Thursday to curb coronavirus infections.

U.S. S&P 500 stock futures edged up 0.03%. Euro Stoxx 50 futures were down 0.39%. German DAX futures fell 0.34%, and FTSE futures fell 0.26%. Oil futures were little changed in cautious trade as investors awaited a meeting later on Tuesday where major crude producers are set to decide output levels for February.

In the United States, control of the Senate is at stake with Tuesday’s dual runoff elections in Georgia. A Democratic victory in both races could tip control of the Senate away from Republicans, but both contests are very tight and the results may not be immediately known, which could lead to a repeat of the chaotic vote re-counts after the U.S. presidential election last year. “2021 starts with a bang with pivotal political and economic news for markets to digest. The undisputed highlight will be the result of the Senate seat run-off elections in Georgia,” James Knightley, chief international economist at ING, wrote in a research memo.

“If the Democrats win both seats this should lead to the most substantial 2021 fiscal stimulus. Nonetheless, it could be the excuse for a near-term consolidation in risk markets after a strong post-election rally.”

Uncertainty about the Georgia vote and worries about rising coronavirus infections sent Wall Street sharply lower on Monday. The Dow Jones Industrial Average fell 1.27%, the S&P 500 lost 1.49%, while the tech-heavy Nasdaq dropped by 1.48%. Outgoing Republican President Donald Trump’s call to pressure Georgia’s top election official to “find” votes to overturn his loss to President-elect Biden in the state has also unnerved some investors.

The House and the Senate are scheduled to certify Biden’s election win on Wednesday, but some Republicans have pledged to vote against this and thousands of Trump supporters are expected to converge on the capital in protest.

The MSCI’s broadest gauge of global stocks was unchanged, sitting just below a record reached in the previous session. Increased risk aversion helped the dollar index rebound from a 2 1/2-year against a basket of major currencies, but moves were subdued at the start of the year.

The British pound bought $1.3591, recovering some of Monday’s losses after Prime Minister Boris Johnson ordered a lockdown to try and slow a fast-spreading coronavirus variant.

U.S. crude futures were little changed at $47.61 a barrel, while Brent futures edged down by 0.1% to $51.04 per barrel. Major oil producers will meet later on Tuesday to decide on output levels for February after talks broke down the previous day. Gold was slightly lower. Spot gold fell 0.16% to $1,939.25 per ounce.

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Gold prices rally 28% so far this year; yellow metal likely to touch Rs 65,000 per 10 gm in 2021

Gold prices in India rallied 28 per cent in rupee terms so far in the year 2020, following a double-digit gain in the previous year. During March this year, yellow metal hit a 52-week low of Rs 38,400 per 10 grams from the level of Rs 39,100 per 10 gm at the start of the year. However, surging a massive 46.33 per cent, it scaled an all-time high of Rs 56,191 per 10 gm in August. While in the international market, it reached a record high level of USD 2,075 an ounce. On a year-to-date (YTD) basis in the current fiscal, gold prices have surged 17.04 per cent.

According to an analyst, improved prospects of global economic recovery due to successful vaccine development have been a key factor for money rotation from gold to risky assets like equity in the last couple of months. “Four-month correction in gold is over and statically gold should have a strong first quarter in 2021. Gold appears to have bottomed out last month and we might see some hiccup in 2021 when the vaccine is rolled out globally but it would be a good opportunity to go long during that time,” Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities, told Financial Express Online.

Gold generates steady returns over various time periods

Gold prices are nearly 10 per cent off from its record high level following the news developments around COVID-19 vaccine. Gold has a track record of generating steady returns over various time periods. According to the analysts at Religare Broking, gold has delivered 13.37 per cent annualised CAGR return over the last 15 years, 9.22 per cent for the last 10 years, 14.96 per cent for the last 5 years and 19.75 per cent for the last 3 years. Gold prices act as a hedge against inflation amid the low-interest rate environment and a huge amount of liquidity infusion in the economy.

Gold may test Rs 65,000 per 10 gm in 2021

Bhavik Patel expects gold to test $2150-$2200 in 2021 and sees silver hitting $35-$40. While on MCX, gold is expected to test Rs 62,000-65,000 in 2021. The fiscal measures to stem the economic fallout due to COVID-19 have already surpassed the last crisis in 2008 with no sign of slowing down. “Money supply has rocketed by more than 20 per cent in just four weeks which is pushing the US dollar down and increasing inflation,” Patel said.

“As we approach 2021, gold will remain in focus for investors, as central banks across the globe have pledged to keep rates low, and easy liquidity to aid growth,” said Nish Bhatt, Founder & CEO, Millwood Kane International. The efficacy of the vaccine, proper implementation of the vaccination process in developing countries, low-interest rate regime, and the global central bank’s stance on liquidity will guide gold prices in 2021.

According to the analysts at Religare Broking, even as volatility in gold prices may remain high after the sharp run-up, metal has a firm support zone at Rs 47700-47200 per 10 gram levels ($1750 per ounce), while the major floor is seen at $1680 per ounce or Rs 44800 per 10gms. “As long as the counter is placed above the mentioned support area, long term structure looks positive where one can expect an upside move towards Rs 53500 per 10 gram initially and then towards Rs 60500 per 10 gram in the medium-term,” the brokerage firm noted. While for the year 2021, it believes gold prices can even scale higher towards Rs 65000 per 10 gram.

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