TCS, Infosys to announce Q3 results today: What to track, how to trade

Two of India’s largest software services exports TCS and Infosys will release their December quarter numbers post-market hours on Thursday. In the seasonally weak Q3, both are expected to report weak numbers but bulls are betting that this could be the last dull quarter before revenue growth picks up in Q4.

We believe 2024 could be a confluence of multiple positive things for the IT sector. Our global equity strategists expect a soft landing of the US economy, a key market for Indian IT Services companies, backed by likely benign inflation and a resilient economy. We see the Fed’s indication of three rate cuts in 2024 and resilience in the US economy to spur enterprise confidence that could translate into stronger IT spending,” said Kumar Rakesh, IT & Auto Analyst, BNP Paribas.

Ahead of the announcement of earnings, shares of TCS were flat while those of Infosys were trading over 1% lower.

What to expect from TCS Q3 Results

“We expect TCS to deliver 1.5% QoQcc revenue growth driven by large deal ramp-ups including BSNL deal, with some offsets from furloughs and ongoing revenue leakage. Expect margins to expand by 45bps QoQ driven by operation efficiencies. PAT to be impacted by US$125m provision on EPIC case. Expect deal wins to remain rangebound due to slower decision-making and no mega-deal announcement,” Jefferies said.

Analysts would be tracking TCS’ BFSI vertical performance, medium-term industry demand trends and impact of macro headwinds on demand, commentary on the US and Europe markets and client budgets, deal wins and deal pipeline, investments in GenAI partnerships and solutions, updates on the BSNL deal ramp-up.

How to trade TCS shares

TCS shares have seen an intermediate correction move after a strong rise. “The IT sector is seeing a bottom reversal pattern. The stock has approached a good support area at Rs 3650/3570 while resistance is at Rs 3770/3840,” Emkay Global said.

What to expect from Infosys Q3 Results

Global broking firm BNP Paribas expects USD revenue decline of -0.5% q-q (-0.2% q-q in CC) due to seasonal furloughs and the continued impact of a slowdown related to a cut in discretionary tech spending partially offset by the Danske Bank deal ramp-up.

Investor focus would be on the reason for cancellation of the MoU that could have translated into a mega deal of US$1.5 billion, translation of mega deals into revenues, deal pipeline, outcome of annual client budgeting exercise and its implications for FY2025, discretionary spending environment, especially in impacted verticals and reasons for senior leaderships exits and replacements.

How to trade Infosys shares

Infosys shares, which are flat in the last one month, have shown weak momentum. “In the past 4 quarters, any decline in stock due to results has given a good buy opportunity. Support is seen at Rs 1430/1360 while resistance is at Rs 1590/1650,” Emkay said.

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