Investing in TCS? Street may be ignoring these three near-term headwinds

BFSI weakness, likely higher US tax rates and a strong rupee do not justify the stock's peak valuations

The market capitalisation of Tata Consultancy Services (TCS) is close to the Rs 6-trillion mark, with the company’s stock gaining 46 per cent over its 52-week low of February last year. Half of the gains have come over the past month, and a large part of those after the December quarter results. Given the sharp price rise, the stock is trading at an expensive valuation of 20 times its FY20 estimates. The near-peak valuations are at a 10-14 per cent premium to the target prices of brokerages.

Analysts at Kotak Institutional Equities say that the stock is trading at full