TCS, Infosys, HCL Tech, other IT stocks jump up to 3% despite weak market sentiment. What to expect as Q2 earnings season begins?

IT stocks rose up to 3% on Thursday, leading gains despite weak market sentiment, as investors turned their attention to TCS, which is set to kick off the Q2 earnings season later today.

Shares of Tata Consultancy Services (TCS) jumped around 3%, while heavyweight peers HCLTech and Infosys gained nearly 2% each. Mphasis, Coforge, LTIMindtree, Tech Mahindra, Persistent Systems and Wipro shares gained 1-2%.

The gains pushed the Nifty IT index nearly 2% higher, making it the top-performing sectoral index on Thursday, while most other sectoral indices remained in the red.


Also read | TCS shares jump 3% ahead of Q2 results. 5 things investors should watch out for

The rise in IT stocks came as the dollar eased slightly but remained close to multi-month highs. Indian IT companies derive a major portion of their revenue from the US, so a stronger dollar means they earn more in rupee terms for the same dollar-denominated revenue. This typically supports sentiment towards IT stocks.

Ongoing concerns around the impact of artificial intelligence have also supported sentiment, with Indian IT services companies increasingly seen as a so-called ‘anti-AI’ trade.

All eyes on TCS Q2 results

TCS is expected to kick off the September-quarter earnings season on a cautious note today, with analysts expecting the IT bellwether to post modest sequential revenue growth. Year-on-year growth is likely to look better, aided by a favourable base and margin support.

Also read | TCS Q2 Results Preview: Can the IT bellwether show enough growth to calm investors?

TCS will likely report a revenue growth of about 13% year-on-year, while profit is expected to rise around 9%, according to the average of seven brokerages. On a sequential basis, however, growth is expected to remain soft, with most brokerages pencilling in constant-currency revenue increase of 0.5-0.6%.

The modest sequential growth reflects the broader weakness in Indian IT services. Client spending remains cautious, discretionary projects are still slow, and investors are watching whether artificial intelligence will add new revenue streams or reduce billing in traditional services.

Overall, Jefferies projects Indian IT services cos to report weak sequential revenue growth of 1.7% in constant currency terms, while aggregate EBITDA margins are expected to improve by 30 bps QoQ, supported by currency tailwinds.

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Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.