Shares of Tata Consultancy Services (TCS) extended their fall for the seventh straight session in Friday's trade after the IT major, in a surprise move, announced a change in its leadership. In an exchange filing, TCS said its CEO Rajesh Gopinathan has tendered his resignation to pursue other interests. Gopinathan has been with TCS since 2001 and has held multiple leadership positions, including that of Chief Financial Officer (CFO).
The company has named K Krithivasan as CEO-designate, effective March 16, and said he would take over as CEO and managing director in the next financial year (September 15), subject to shareholders' approval.
Like Gopinathan, new CEO-designate Krithivasan is also a Tata Group veteran. He began his career with TCS in 1989 and has held various leadership roles since then in delivery, customer relationship management, large program management and sales. He is currently President and Global Head of BFSI.
The TCS stock today fell 1.25 per cent to hit a day low of Rs 3,145 over its previous close of Rs 3,184.75. The counter has declined around 9 per cent in a month.
A total of 44,000 shares changed hands today on BSE, which was lower than the two-week average volume of 75,000 shares. Turnover on the counter stood at Rs 14.41 crore, commanding a market capitalisation (m-cap) of Rs 11,59,150.88 crore.
Kotak Institutional has assigned an 'Add' rating for TCS with a target price of Rs 3,500.
Nuvama Institutional Equities said, "The announcement is a surprise given Gopinathan's track record and long association with TCS. Even so, we believe TCS has among the strongest leadership bench in the industry; hence, the transition shall be as smooth as when Gopinathan had taken over the reins from N Chandrasekaran, who was promoted as the chairman of Tata Group."
Axis Capital also expected that the transition would be smooth. However, the brokerage mentioned that "this is sentimentally negative as this is the first CEO resignation at TCS since its incorporation."
On the technical front, the next support could be seen at Rs 3,040, followed by Rs 2,900 and Rs 2,800 levels, analysts said.
Pravesh Gour, Senior Technical Analyst at Swastika Investmart, "The primary structure of the counter is in a downtrend, and it is trying to form a base around the Rs 2,900 level, which was the breakout level of December 2020. The stock has been trading in a broad range of Rs 3500–3000 for more than 8 months, and currently, it is trading in the middle of the range with a negative technical structure, which opens the risk of a retest of the Rs 3000 level. On the upside, the cluster of moving averages around Rs 3,300 represents an immediate barrier; above this, we can expect a short covering move towards Rs 3,500. Momentum indicators are negatively poised to support the current weakness."
Ganesh Dongre, Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers, said, "On the daily chart stock has broken down from its ascending triangle chart pattern, this represents stock price has been consolidated from almost 4-5 months in an ascending price range. So currently stock is trading in the Rs 3,110-3,150-odd zone, if we break this level then we may see further selling in this stock toward the previous weekly low of the price Rs 2,900 level. From the view of other technical parameters, MACD still turning down which is also a bearish sign. So, we advise traders to avoid long at this level in this stock and can wait for the next support level which is at Rs 2,900-2,800."
AR Ramachandran from Tips2trades said, "TCS has strong support at 3163 on the daily charts. A surprise top management exit coupled with a bearish sentiment could lead to a fall till the next support of Rs 3,040. Resistance will be at Rs 3,280."
The stock was last seen trading lower than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 30.18. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 29.80.
The scrip has an average target price of Rs 3,660.33, Trendlyne data showed, suggesting a potential upside of 15.31 per cent. It has a one-year beta of 0.99, indicating average volatility on the counter.
Meanwhile, Indian equity benchmarks extended their gains for the second straight session in late morning deals today, led by gains in metals, technology and consumer durables.
Also read: How TCS shares fared under CEO Rajesh Gopinathan: Stock up 164%, total dividend at Rs 352
Also read: TCS CEO designate K Krithivasan is first among equals: His profile, analyst views & more
Copyright©2023 Living Media India Limited. For reprint rights: Syndications Today