Tata Consultancy Services (TCS) is under the market spotlight following reports of an average 5% salary increment for its global workforce and a detailed analysis of its Q1 performance. Despite a recent downturn in its stock value, leading brokerages are offering varied perspectives on the IT giant's future.
The company, which employs approximately 584,519 people worldwide, has seen its shares decline by 11.23% over the past month, 29.05% in 2026, and 34.92% over the last year. This performance comes amidst a broader re-evaluation of the Indian IT sector.
Analyst Outlook: Arihant Capital Markets
Arihant Capital Markets has issued a 'Buy' rating for TCS, projecting a target price of Rs 2,752, which suggests a potential upside of 20%. The brokerage firm identifies Indian IT stocks as an attractive investment opportunity, noting they are currently trading at a significant 30% discount compared to their average price-to-earnings (P/E) multiples over the last three and seven years.
A key factor contributing to this optimistic view is the ongoing depreciation of the Indian Rupee. With the exchange rate at INR 96.38 against the US dollar, compared to INR 85.6 a year ago (a 12.5% depreciation), Arihant Capital highlights a substantial boost to earnings. As Indian IT companies primarily earn in USD but incur costs in INR, a weaker rupee directly enhances reported revenues, profit margins, and earnings per share without requiring additional operational adjustments.
Arihant Capital also holds 'Buy' ratings for other IT players, including Infosys (target: Rs 1,438) and Birlasoft (target: Rs 411).
Kotak Institutional Equities' Assessment
In contrast, Kotak Institutional Equities presented a more cautious stance in its recent assessment of IT firms' March quarter results. The firm observed that the sector's performance was somewhat underwhelming after a period of relative stability. Factors contributing to this view included minor discrepancies in growth forecasts, uninspiring total contract value (TCV), and guidance that fell short of expectations. Furthermore, the emerging trend of Generative AI (GenAI) potentially leading to revenue deflation is anticipated to maintain pressure on valuation multiples.
Kotak acknowledges that IT companies are making progress with AI-driven opportunities. However, it cautions that these advancements might not be sufficient to fully offset the deflationary pressures. The challenge of counteracting growth headwinds amid intense competition is significant. While managing margin pressures through cost optimization strategies is deemed feasible, the overall environment remains complex.
Despite these challenges, Kotak Institutional Equities lists TCS among its top picks for Tier 1 IT companies, alongside Tech Mahindra and Infosys. For mid-tier firms, Hexaware and Coforge were highlighted.
TCS Specific Performance and GenAI Impact
TCS demonstrated sequential revenue growth of 1.2% (0.8% organically), leading its Tier 1 peers. However, Kotak's analysis suggests that TCS, given its established market position, could be susceptible to disruptions caused by GenAI. Nevertheless, the brokerage firm also recognizes TCS's robust AI capabilities, deep domain expertise, strong client relationships, and proven experience in navigating previous technology shifts. These strengths are expected to enable TCS to maintain growth aligned with the broader industry. The current valuations for TCS shares are also considered attractive.