TCS down 1%, hits 4-month low day after CEO & MD Rajesh Gopinathan resigns

Shares of Tata Consultancy Services (TCS) hit four-month low at Rs 3,145, down 1 per cent on the BSE in Friday’s intra-day trade after the company’s Managing Director (MD) and Chief Executive Officer (CEO) Rajesh Gopinathan on Thursday decided to step down to pursue other interests. The stock of information technology (IT) major was quoting at its lowest level since October 27, 2022.

In his six years as CEO, TCS added over $10 billion in incremental revenues and over a $70 billion increase in market capitalisation.

The board has nominated K Krithivasan as CEO designate with effect from March 16, 2023. Gopinath will continue with the company till September 15, 2023 to provide transition and support to his successor.

Gopinathan was appointed as TCS CEO & MD for the first time in FY17 after serving as CFO since FY13. His first tenure as CEO was from FY17 to FY22 while he was reappointed as CEO & MD last year till FY27.

The press release suggests the departure does not looked like a sudden one since Gopinathan had been discussing with the chairman and board on what he is planning to do in the next phase of his life and they collectively decided that end of this fiscal year is a good time for him to step aside and pursue those interests, ICICI Securities said in a note.

Gopinathan will continue with the company for almost six months from today, which means a smooth leadership transition. However, in our view, K Krithivasan could be an interim CEO on the basis of, age, as he likely approaching age of 60, his tenure as a CEO is not mentioned in the press release, the brokerage firm said.

Analysts at Motilal Oswal Financial Services continue to see TCS as the best play in the IT services space in the current environment. It is focused on cost optimization and vendor consolidation, both of which are its strong areas. TCS is also poised to gain from a favorable pyramid mix change to improve margins in FY24, ahead of its peer group.

Increase in interest rates, slow economic growth, and elevated geo-political tensions have adversely affected the macro environment and raised concerns about IT spends. Given TCS’s size, order book, and exposure to long duration orders, and portfolio, it is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth, the brokerage firm said in company update.

Owing to its steadfast market leadership position and the best-in-class execution, the company has been able to maintain its industry-leading margin and demonstrate superior return ratios, it added.

At 10:30 AM; TCS had recouped most of its day’s loss and was down 0.3 per cent at Rs 3,176, as compared to 0.5 per cent rise in the S&P BSE Sensex. In past one month, the stock underperformed the market by falling 9 per cent, as against 5 per cent decline in the benchmark index.

Technical View

Bias: Negative

Target: Rs 3,000

Support: Rs 3,150

Resistance: Rs 3,340; Rs 3,400

TCS has witnessed a steep 12 per cent fall from its high of Rs 3,575 on February 16, 2023. The stock is currently trading with a negative bias, as it languishes below all its key moving averages on the daily chart.

On the weekly scale, the stock is seeking support around its two-year trend line at Rs 3,150-odd level, which also coincides with the lower-end of the Bollinger Bands.

As long as the stock manages to sustain above this level, one can expect some consolidation at the counter. However, the upside for now seems capped around Rs 3,340 – Rs 3,400.

Meanwhile, sustained trade below Rs 3,150 level can trigger a fall towards the Rs 3,000-mark.

(With inputs from Rex Cano)