TCS share price rebounds 14% from September low: Can the rally extend further?

Tata Consultancy Services (TCS) share price rose 3% on Wednesday, 14 October, extending gains for a second consecutive session as investors continued to react to the IT major’s Q2 results and its upbeat growth outlook. TCS shares have rebounded nearly 14% from their 29 September low of ₹2,032.

TCS share price today opened at ₹2,277 apiece on the BSE, the stock touched an intraday high of ₹2,335.45 per share, and an intraday low of ₹2,268 per share.

Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said TCS has staged a nearly 14% pullback from its 29 September low of ₹2,032. The stock has reclaimed its 20-day, 50-day and 100-day exponential moving averages (EMAs), signalling an improvement in its near-term price structure. The recovery has been accompanied by rising trading volumes, while the Relative Strength Index (RSI) has moved above 60, indicating renewed bullish momentum.

Shah said the ₹2,250–2,260 zone is likely to act as immediate support. He expects the stock’s recovery to extend as long as it sustains above this level.

TCS, which kicked off the September-quarter earnings season for corporate India on 8 October, reported a 15% year-on-year increase in net profit to ₹13,884 crore for Q2 FY27, compared with ₹12,075 crore in the year-ago period. Profit was also higher than the ₹13,349 crore reported in the preceding June quarter.

Revenue from operations rose 11.22% year-on-year to ₹73,188 crore in the July-September quarter, compared with ₹65,799 crore a year earlier. Revenue in the June quarter stood at ₹72,275 crore.

Artificial intelligence (AI) continued to be a key growth driver, contributing around 10% of TCS’ overall revenue. Chief Executive Officer K. Krithivasan said the company’s annualised AI revenue increased to $3.1 billion in the September quarter, up from $2.6 billion in the preceding quarter.

Krithivasan said growth during the quarter was broad-based and expressed confidence that the momentum would continue, citing the company’s deal pipeline, contract signings, and ongoing client conversations.

Chief Operating Officer Aarthi Subramanian said AI revenue was growing at the fastest pace in the banking, financial services and insurance (BFSI), manufacturing and life sciences verticals.

On the deal front, TCS reported total contract value (TCV) of $9.6 billion for the September quarter, marginally higher than the $9.5 billion recorded in the preceding quarter.

Axis Securities expects Tata Consultancy Services (TCS) to deliver stable performance in the second half of FY27, supported by a strong order book, large mega deals, AI-led transformation and positive momentum across most industry verticals.

The brokerage believes the company’s growth momentum will remain intact in the coming quarters, aided by healthy business prospects, workforce upskilling, and reinvestment of gains to build capabilities. Axis Securities has maintained its Buy rating on the stock with an unchanged target price of ₹2,360 per share. The brokerage values TCS at 14.5 times its estimated FY28 earnings per share (EPS).

PL Capital expects only a modest improvement in TCS’ organic growth in the second half of FY27, despite improving AI traction and a healthy deal pipeline, citing furloughs and continued weakness in traditional services.

However, the brokerage has raised its FY27 and FY28 revenue growth estimates to 3.4% and 5%, respectively, from 2.9% and 3.6% previously, reflecting an expected contribution from MHP starting in Q4 FY27.

On profitability, PL Capital noted that TCS’ Q2 EBIT margin of 24% came in 40 basis points below its estimate of 24.4%. Investments in AI capabilities, strategic partnerships and acquisitions, along with higher bench and subcontracting expenses, weighed on margins. Management also indicated that the integration of MHP could result in around 50 basis points of margin dilution.

Consequently, the brokerage has lowered its FY27 and FY28 EBIT margin estimates to 24% and 24.2%, respectively, from 24.6% and 24.8% earlier. It expects organic US dollar revenue and rupee-denominated profit after tax to grow at a compound annual growth rate (CAGR) of 3% and 6.6%, respectively, over FY27-FY29.

PL Capital has maintained its Buy rating on TCS with a target price of ₹2,390 per share.

Systematix Institutional Research has retained its Hold rating on TCS with an unchanged target price of ₹2,350, based on 14 times its estimated December 2028 EPS.

The brokerage has cut its FY27, FY28 and FY29 EPS estimates by 0.6%-1.5%, factoring in recent performance, elevated investments, higher subcontracting expenses and macroeconomic headwinds. It has not yet incorporated the impact of MHP’s consolidation on revenue and margins.

At the current market price, Systematix estimates that TCS is trading at 14x, 13x, and 12x its FY27, FY28, and FY29 earnings, respectively — a 16% discount to HCL Technologies.

However, the brokerage noted that TCS has outperformed its peers on margins and net profit growth across the three periods. It continues to value the stock at 14 times its target earnings multiple, supported by improving client cohort metrics, a 5.9% payout yield and an attractive 7% free cash flow yield.

Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her focus is on monitoring stock trends, initial public offerings (IPOs), corporate news, policy shifts, and larger economic trends that affect investors and market players. <br><br> At LiveMint, Dhanya consistently writes and produces articles that make complex financial topics accessible to readers. She keeps a close eye on equity markets, commodities, and macroeconomic indicators, assisting audiences in comprehending how global and domestic events influence investment perspectives. Her stories frequently underscore emerging trends within sectors, the IPO market, company earnings results, and market strategies pertinent to both retail and institutional investors. <br><br> Before her tenure at LiveMint, Dhanya accumulated a wealth of professional experience at various companies, including MintGenie, Informist, Cogenics, Chary Publications, KPMG, and the Royal Bank of Scotland. These positions allowed her to establish a solid foundation in financial research, reporting, and content creation. <br><br> Throughout her career, she has explored numerous subjects such as trading strategies, commodities, IPOs, wealth generation, corporate profits, and macroeconomic indicators. Her background in both financial journalism and corporate settings has given her the ability to tackle stories with analytical rigor while ensuring clarity for her audience. Through her contributions, Dhanya strives to deliver insightful, trustworthy, and investor-centric financial content.

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