Infosys, TCS, Mindtree: Strategies for IT stocks ahead of Q4FY21 numbers

If the Nifty IT index manages to sustain above 27,200 levels, the upside bias may see a rally towards 27,800-mark in the upcoming sessions

Information Technology (IT) counters reversed early morning gains and traded in the red on Monday as the sector looked set to report the March quarter results. Sector giant Tata Consultancy Services (TCS) will kick-off the Q4FY21 results today while Infosys, Wipro, and Mindtree will follow suit later this week.

Analysts expect the Tata Group crown jewel Tata Consultancy Services (TCS) to maintain its leadership position in the space in terms of revenue growth and margin expansion aided by certain large deals such as Postbank and Prudential Financial, ramp-up in multiple $50-100 million deals won in the preceding quarter, and strong demand in areas of cloud and customer experience.

"Deal win momentum is likely to be tepid given lower deal announcements compared to prior quarters and will include a contribution from the $550 million of deal with Postbank Systems AG. We expect a 4.3 per cent QoQ CC and 5 per cent QoQ dollar revenue growth in Q4 at $5,986 million," Nomura said in an earnings preview note.

Overall, IT results are expected to show steady expansion, with a number of new deal wins. Given acceleration in cloud adoption and a pickup in tech spending across verticals, the sector should do well. However, there may be margin pressure due to wage hikes. Currency trends could also boost rupee earnings. This holds for the pharma sector and other exporters, too. The FY22 guidance from IT majors will be important for sentiment.

At 11:24 am, the Nifty IT index was quoting at 26,858 levels, down about 2 per cent on the National Stock Exchange (NSE). Earlier in the day, the index has hit record high level of 27,524.6. In comparison, the benchmark Nifty50 index was down 2.7 per cent at 14,422.

Individually, Mindtree, Mphasis, Wipro, Coforge, L&T Infotech, HCL Tech, and Tech M were down in the range of 2 per cent to 4 per cent. TCS and Infosys, meanwhile, slipped 1 per cent and 0.5 per cent.

Against this backdrop, here is how IT stocks look on charts:

NIFTY IT INDEX

Likely target: 27,500 - 27,800

Upside potential: 1.55% - 2.66%

The index has managed to sustain above the resistance of 27,200 levels. The recent up move, too, has built a positive sentiment for the upcoming sessions. The Moving Average Convergence Divergence (MACD) has sustained above the zero line, suggesting that the upward direction may see a rally in the direction of 27,500 to 27,800 levels in the near-future. The support comes at 27,100 and 26,700 levels, as per the daily chart.CLICK HERE FOR THE CHART

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Infosys Ltd (INFY)

Likely target: Rs 1,530 - Rs 1,580

Upside potential: 5.52% - 8.97%

After a breakout above Rs 1,400 levels, the stock claimed an all-time high of Rs 1,477 on April 12, 2021. This upward bias is anticipated to stay strong even with the negative divergence of Relative Strength Index (RSI), which is unable to defend the bullish price strength. The overall trend is moving towards Rs 1,530 to Rs 1,580 with a closing basis support of Rs 1,400 mark. CLICK HERE FOR THE CHART
 
Tata Consultancy Services (TCS)

Likely target: Rs 3,500 -  Rs 3,650 (above the breakout of  Rs 3,340)

Upside potential: 4.79% - 9.28%

The stock is attempting to conquer the resistance of Rs 3,340 levels on a closing basis. Unless a decisive move does not emerge, the upside bias may see selling pressure. However, once the stock breaksout above the resistance level, it may see a move towards Rs 3,500 to Rs 3,650-mark. The immediate support comes at Rs 3,200 levels, as per the daily chart. The medium-term support stays at 100-days moving average (DMA), set at Rs 3,017 levels. CLICK HERE FOR THE CHART
 
Wipro Ltd (WIPRO)

Likely target: Rs 485 - Rs 495

Upside potential: 5.43% - 7.61%

The stock has an overall resistance of Rs 460 levels. Howwver, the immediate resistance is at Rs 452 levels, as per the daily chart. The major support, on the other hand, comes at Rs 425 and Rs 405 levels, which are its 50-DMA and 100-DMA. The MACD has crossed the zero line upward, indicating a positive bias. A breakout above Rs 460 may result in a rally towards Rs 485 and Rs 495 levels. CLICK HERE FOR THE CHART

Coforge Ltd (COFORGE)

Likely target: Rs 3,250 - Rs 3,350

Upside potential: 6.73% - 10.02%

The medium term outlook is bullish on the stock with "Higher high, higher low" formation, as per the weekly chart. While the weekly RSI has a negative divergence, the stock price is not showing any weakness. The bullish trend is heading towards Rs 3,250 to Rs 3,350 levels with immediate closing support comes at Rs 3,000 levels. The medium-term support is at Rs 2,800 levels. CLICK HERE FOR THE CHART
 
Mindtree Limited (MINDTREE)

Likely target: Rs 2,210 and Rs 2,260

Upside potential: 2.46% - 4.78%

The "Higher high, higher low" formation indicates a strong bullish bias. This positive sentiment is intact till the stock defends the support of Rs 2,100 on a closing basis. Although, the RSI is trading in the overbought category, the stock price is not showing any deep negative correction. The reversal may see a rally towards Rs 2,210 and Rs 2,260 levels. CLICK HERE FOR THE CHART