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Optimistic guidance from TCS boosts investor sentiment for IT industry; NIFTY IT index jumps over 3%

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By Rohan Takalkar

2 min read | Updated on January 10, 2025, 17:09 IST

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SUMMARY

TCS reported its Q3FY25 numbers in line with industry estimates. However, the management guidance and outlook on revival in discretionary spending by its customers suggest contract wins to improve across all verticals and geographies. The positive commentary has boosted investor sentiments for all other IT stocks ahead of their Q3 results.

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TCS
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Optimistic guidance from TCS boosts investor sentiment for IT industry; NIFTY IT index jumps over 3%

The NIFTY IT Index jumped at 3.2% on Friday morning as all its constituents traded in the green. TCS announced its Q3 results yesterday, reporting an 11.9% rise in net profit at ₹12,380 crore. It also posted robust order book numbers at a record of $10.2 billion, which boosted investor sentiments.
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TCS shares jumped as much as 6% intraday to ₹4,280 apiece on the NSE. The gains were followed by LTI Mindtree (+5.5), Tech Mahindra (+3.7%), Wipro (+3.3%), Persistent (+2.9%), Infosys (+2.3%), and HCL Technologies (+2.1%), as of 1:00 pm on Friday, January 10.

The gains in TCS shares were largely attributable to strong Q3 earnings and a robust order book at $10.2 billion. Moreover, management guided an optimistic outlook for the IT industry, lifting all the industry participants higher in the trade.

What are the key triggers for the industry?

TCV at record high levels

The company posted a decline in sequential numbers across all major geographies and segments. However, the total contract value (TCV) jumped to two quarter-high levels, indicating a positive momentum in the business.

Improvement in discretionary spending

Despite a bleak global outlook, the company’s management sees a strong improvement in discretionary spending in North America and other markets. Key segments like BFSI, consumer business (CBG), and other verticals continued to witness improvement in contract wins, and management feels confident about holding on to the $10 billion mark in the coming future.

Margin expansion despite a weak quarter

Despite the sequential decline of 4% in revenue for the quarter, the margin improvements were led by cost efficiencies and currency depreciation. Consequently, they led to an accretion in profitability as well. The margin expansion and robust profitability have boosted investor sentiments for all other industry participants.

Management commentary remains positive

K Krithivasan, Chief Executive Officer and Managing Director, said, “We are pleased with the excellent TCV performance in Q3, which was well-rounded across industries, geographies and service lines, lending good visibility to long-term growth. BFSI and CBG returning to growth, continued stellar run of Regional Markets, and early signs of revival in discretionary spending in some verticals give us confidence for the future. Our continuing investments in upskilling, AI/Gen AI Innovations and partnerships set us up to capture the promising opportunities ahead.”

Shares of TCS closed 5.65% higher on Friday at ₹4,265 apiece on the NSE.

About The Author

Rohan Takalkar
Rohan Takalkar is a senior writer at Upstox and a seasoned capital markets analyst with around 8 years of experience. He is passionate about writing on equities, global markets, and the economy.

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