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Don’t expect any surprises from Tata Consultancy Services (TCS), which is scheduled to report its results for the quarter ended June 30 post market hours on Thursday.

Dollar revenue growth during the quarter is expected to be 2.9 percent at USD 4,581 million QoQ; and constant currency growth is estimated to be around 2-2.5 percent, which may be lower compared with 3.1 percent in Q1FY17, 3.5 percent in Q1FY16 and 4.8 percent in Q1FY15.

IT stocks have been under pressure largely on account of appreciating currency, a slowdown in global demand, visa-related issues as well as shrinking of revenues. TCS underperformed Nifty index so far 2017, but outperformed Infosys in the same period.TCS rose a little over 3 percent so far 2017, while Infosys plunged nearly 4 percent in the same period. The stock is unlikely to climb new heights anytime soon, but it is a good long term bet if somebody has an investment horizon of 2-3 years, suggest experts.

This software behemoth went out of favour way back in October 2014 after registering a lifetime high of Rs 2,839 and since then it is making the continuously lower top and lower bottom structure suggesting that for almost 3 years this counter is unpopular with big investors.

“One possible explanation of the technical expectations from the software major are very low and hence even if it disappoints on the results front there may not be much price damage as more or less current prices appears to have factored in lot of negativity associated with this sector.

The stock gave negative returns in three out of four occasions in the last one year. TCS slipped marginally post March quarter results and by nearly 4 percent post-December quarter results.It rose by 1.6 percent post-September quarter of FY17 results but slipped by a little over 3 percent post-June quarter results of FY17.

The tendency is for TCS to remain calm on most occasions. This has to do with the trend where Infosys results come out first and then TCS.“Infosys has often surprised markets both ways and seen big moves on the result day. But TCS has more often than not been in line. So, TCS often sees a positive turn of events.

A look at the chart for TCS indicates heightened volatility over the last few sessions owing to increased intraday movement. This usually points to chance of sharp movement in the run up to and post results.The best course of action would be to buy the 2400 PE and 2500 CE for TCS for the July expiry for a combined premium of Rs. 77-78.

If the stocks swing sharply either way post this numbers long straddle will pay back handsomely. For those not into derivatives and holding the stock, it would be a good idea to just continue holding the stock.

In case TCS declares disappointing results, in such a scenario risky traders can take a punt with an out of the money call option so that his maximum loss can be limited whereas any positive surprise will trigger some sort of rally which will help these punters to make some money.

Trend-wise this counter shall get stuck up in a broader range of 2600 – 2300 whereas only a close above 2700 levels shall have the potentiality of changing its long-term downtrend.This time both Infosys and TCS are making their announcements together overnight which makes it tricky. Also, they have bounced back near term from a support.

While we think the medium term trend is down in the near term, there is some more room for TCS to move up to 2557 or near a 61.58% retracement of the June decline.

Last modified on Thursday, 13 July 2017

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