Weak rupee, TCS mood-upper lift Nifty IT index to new high

Our Bureau | | Updated on: Apr 20, 2018

The IT major on course to hitting $100-billion m-cap

The Nifty IT index on Friday registered a lifetime high on weak rupee against the US dollar and a robust growth guidance by Tata Consultancy Services.

The rupee on Friday crashed below the key 66 level to settle at a 13-month low of 66.12 against the dollar. This is the lowest closing level of the rupee since March 10, 2017, when it had settled at 66.6.

A cheaper rupee bodes well for Indian IT companies, as they derive a huge share of their revenues from exports.

The strong result, positive guidance and bonus issue announced by TCS after market hours on Thursday, lifted the stock to its all-time high. After scaling a new peak at ₹3,421.25, TCS settled the day at ₹3,406.40 on the BSE, a gain of over 6.76 per cent.

This also boosted its market capitalisation, which moved up by ₹41,301 crore to ₹6.52 lakh crore, which is almost $99 billion, a whisker away from the $100-billion mark.

Peers follow

Other IT majors such as Infosys, HCL Technologies, Tech Mahindra and Wipro also gained in the range of 2-5 per cent.

The Nifty IT index, after registering a new peak at 13,964.30 in intraday deals, closed the day at 13,910.35, up 4.8 per cent or 636.90 points.

According to HDFC Securities, key positives for TCS include accelerated scaling of digital business, strong traction in Europe with UK/Continental Europe, recovery ahead in retail and consumer packaged goods and strong free cash flow generation.

It also announced a 1:1 bonus issue of shares and dividend of ₹29 a share, taking the total payout to shareholders at ₹50/share for the year.

Emkay assigns ‘accumulate’

With 2 per cent constant currency growth in revenues and 20 bps improvement in OPM sequentially, TCS reported better-than-expected quarterly numbers, said Emkay. Digital revenues grew10 per cent q-o-q in CC terms, it added.

“Our view on TCS’ sustained financial outperformance gets further reinforced post the management commentary on improved deal signings, broad-based growth performance, and the company’s emerging supremacy in digital business. We maintain our ‘accumulate’ rating on the stock with a target price of ₹3,330.”

However, Motilal Oswal Securities, which maintains a neutral stance on TCS with a target price of ₹3,000, said the stock already trades at 19x FY20 expected earnings, and continued single-digit growth rate will not make a case for further expansion in valuation multiples.

Published on April 20, 2018
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