TCS shares rally 6% in 2 sessions after Q2 results. What are technicals indicating for the IT major?

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ETMarkets.com

TCS reported a 15% year-on-year rise in consolidated net profit to Rs 13,884 crore. 

The company reported a 15% year-on-year (YoY) growth in its consolidated net profit at Rs 13,884 crore for the second quarter. The same stood at Rs 12,075 crore a year ago. The Board has declared a second interim dividend of Rs 12 per share for the financial year 2026-27.

In constant currency terms, revenue rose 0.5% quarter-on-quarter. Operating margin came in at 24%, while net margin stood at 19%.

What are charts showing?

TCS witnessed a sharp pullback towards its 50-day EMA but faced profit booking around this level. Despite the recovery and early signs of improving momentum, the broader technical structure remains weak, Sudeep Shah, Head of Derivatives Research at SBI Securities said. On the weekly chart, the stock continues to trade below key moving averages. The 20-week EMA zone of Rs 2,255–2,260 is likely to act as immediate resistance. A decisive breakout above this zone would be necessary to strengthen the case for a meaningful pullback in the near term.

“The Nifty IT Index has been consolidating in the 27,613–28,777 range since late September. The index continues to trade below key moving averages on the weekly chart, keeping the broader trend weak. The RSI has recovered from oversold territory, but momentum remains subdued, with no clear signs of a strong trend reversal yet,” he added.

On the Relative Rotation Graph (RRG), the IT Index is placed in the Improving quadrant, indicating early signs of improving momentum, although relative strength remains limited. The 27,600–27,550 zone is likely to act as immediate support, while the 20-week EMA zone of 29,500–29,550 is expected to act as a key resistance. A decisive and sustained breakout above this zone could trigger a meaningful pullback in the near term.

Should you buy TCS shares?

Nomura has maintained its Buy rating on TCS with a price target of Rs 2,630, implying an upside of 27%. The brokerage noted that the company's trailing 12-month deal wins remained flat year-on-year, while near-term demand conditions were largely unchanged as clients continue to scrutinise discretionary spending that does not offer immediate benefits.

Goldman Sachs has maintained its Buy rating on TCS with a target price of Rs 2,210. While revenue growth was in line with estimates, margins fell short of expectations as headcount increased for the third consecutive quarter, the foreign brokerage said. EBIT margins remained flat sequentially despite international growth and the absence of wage hikes, prompting the brokerage to cut its EBIT margin estimates by up to 20 basis points. Deal win growth also turned negative, signalling a subdued revenue growth environment, although Goldman Sachs largely retained its revenue and earnings per share estimates.