TCS hits 9-month high; stock up 15% in May

Tata Consultancy Services (TCS) moved higher by 2% to Rs 2,612 in intra-day trade, extending its Wednesday’s 1.5% gain on the BSE. The stock is trading at its highest level since August 19, 2016.

Thus far in the month of May, TCS has outperformed the market by surging 15% as compared to 1.9% rise in the S&P BSE Sensex.

TCS had commenced its Rs 16,000-crore mega buyback offer from Thursday, May 18. The buyback programme, which received shareholder approval last month, will close on May 31.

In February, the board of TCS had approved the proposal to buy back up to 56.1 million equity shares at price of Rs 2,850 per equity share. The buyback is proposed to be made from the shareholders of the company on a proportionate basis under the tender offer route.

Share buybacks typically improve earnings per share (EPS) and return surplus cash to shareholders while also supporting share price during periods of sluggish market condition.

Meanwhile, analysts believe that the company’s banking and financial services solution (BFSI) and retail business will bounce back during the current financial year 2017-18 (FY18).

“BFSI and Retail were the laggards in FY17 mainly due to softness in client spend in North America (in BFSI) and structural stress in Retail segment in the same region. However, we believe that BFSI will bounce back through FY18E on the back of revival in IT spend and consistency in order pipeline for TCS,” KRChoksey Institutional said in a note.

“While BFSI is expected to improve slightly on improving deal pipeline for TCS going ahead, we remain circumspect of secular growth. A buyback of Rs 16,000 crore, which has received shareholder approval and Q1 seasonality are expected to limit the downside,” said analysts at HDFC Securities in results review.

At 12:47 pm; the stock was up 1.7% at Rs 2,602 on BSE as compared to 0.52% rise in Sensex. The trading volumes on the counter more than doubled with a combined 1.49 million shares changed hands on BSE and NSE so far.

With the sharp rally in market price during the month, TCS, the country's largest software services exporter, has regained a market valuation of over Rs 5 lakh crore. The company has market capitalisation of Rs 512,508 crore, the BSE data shows.

The stock is 5% away from its 52-week high of Rs 2,740 touched on August 12, 2016 during intra-day deal. It hit a record high of Rs 2,834 in October 2014.