Market braces for Infosys, TCS earnings tussle

Why has Tata Consultancy Services (TCS) advanced its quarterly results announcement? This is the question most investors are asking as they brace up for the company’s earnings on Thursday, when its rival Infosys too is declaring the results.

Usually, TCS, the country’s largest software exporter, announces its earnings a few weeks after Infosys. But this time around, both the companies are doing it on the same day, for the first time.

Analysts unanimously agree that TCS will take the lead this quarter with estimated volume growth of four percent. Ankita Somani, an IT analyst with Angel Broking believes that this could be the reason why TCS would have decided to advance its results.

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“TCS has become the leader in IT now and they will want to assert that,” she said.

However, there are others who think there is nothing much to read into it.

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“I think this is just because of convenience and there is nothing more to it,” said an analyst on condition of anonymity, adding this could be because of the availability of board members.

On company performances, the analyst expects Infosys to post flat margins despite the help from a depreciating rupee as the company’s spending has increased this quarter with rising visa costs and onsite hiring.

Apart from this there are also rumours of Infosys making some big-bang announcement in order to prop a lacklustre stock. The speculations doing the rounds are a share buy-back announcement, or higher divident for shareholders.

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The key things to watch out for this earnings season is what these companies announce with respect to the July-September-typically a stronger quarter as the holiday season lulls the next quarter.

“We will watch out for the Q2 forecast particularly and note the guidance each of these companies give. Q1 has been a disappointment and hopefully that won’t drag on,” said Somani.

Pricing of different services such as analytics and cloud computing also becomes essential as these companies’ efforts are directed towards bringing these solutions into their offering.

Commenting on market speculation about Infosys might buyback shares worth Rs 200 crore, Somani said that even if it happens, it will only trigger the share price of the company in the near-term and it won’t affect the company’s stock price in the long-term.