TCS and Wipro lead rally in IT stocks after TCS CEO announces multi-year 'technology transformation' cycle in the works

TCS and Wipro lead rally in IT stocks after TCS CEO announces multi-year 'technology transformation' cycle in the works
Tata Consultancy Services (TCS) CEO and MD Rajesh GopinathanBCCL
  • The stocks of the top Indian IT services companies are the top gainers in Nifty 50 today morning after Tata Consultancy Services (TCS) announced its earnings late last evening.
  • The CEO of India’s largest IT services company said that TCS was in the first phase of a multi-year ‘technology transformation’ cycle.
  • Wipro's rally may also stem from its announcement of considering share buyback at the next board of directors meeting.
IT stocks continue to rally for a second week after India’s top IT services company announced that there is a multi-year technology transformation cycle in the works.

“What we are witnessing right now is the start of the first phase,” said TCS CEO Rajesh Gopinathan during the earnings call yesterday. TCS’ own share price is up by more than 4% alongside Wipro, HCL Tech and Infosys.

In fact, these four companies are currently the top gainers in the Nifty 50 today morning.

Company% change in share price
HCL Tech4.4%
Tech Mahindra3.24%
Source: NSE, Share prices as of 11:00am

Wipro’s rally also stems from the announcement of it considering to buyback shares during the next board of directors meeting on October 13.

TCS embarks on a multi-year technology transformation cycle
Gopinathan explained that currently, in the first phase of the multi-year technology transformation cycle, companies are building a cloud-based foundation. This will become the ‘resilient, secure and scalable’ digital core of their business.

In the following phases, the industry will witness the native capabilities of these platforms coming up in new use cases. They will be used to create “innovative new business models and differentiated customer experiences,” he said.

The cycle is driven by the desire to accelerate availing the business value of investments that clients have made in technology, according to TCS COO NG Subramanam. The company’s role is to help clients open up more micro services and ecosystems to building partnerships, not just internally within the organisation, but also with other companies.

Subramaniam further highlighted that the multi-year cycle involved investments in multiple areas — whether it's the way of working, secure borderless work spaces (SBWS), the 25/25 vision and other measures — all of which are coming into play one way or another. “In the last six months, the resilience of cloud collaboration and digital has been proven beyond doubt,” he said.

In the second quarter, TCS raked in $8.6 billion worth of new deals — including the deal with Phoenix Systems for $2.5 billion — with its revenue jumping 4.8% over the previous quarter and revenue up by 6.7% sequentially.