Pulse of the Street: Sensex, Nifty rally on TCS earnings after midweek rout

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Mumbai: Indian equities staged a sharp comeback on Friday as better-than-expected earnings from Tata Consultancy Services (TCS) and easing geopolitical concerns revived investor sentiment after a turbulent week dominated by renewed US-Iran hostilities and higher oil prices.

Analysts, however, said the rebound would need support from more encouraging corporate earnings and easing geopolitical tensions to sustain next week.

On Friday, the BSE Sensex jumped 1.08% to close at 77,569.39, while the Nifty 50 gained 1.02% to settle at 24,206.90. The gains built on Thursday’s modest recovery of 0.31% and 0.34%, respectively, after Wednesday’s sharp sell-off.

Even so, the two-day rebound was not enough to erase the more than 2% decline on Wednesday, leaving both benchmark indices about 0.2% lower for the week.

Markets remained under pressure for most of the week after fresh US strikes on Iran reignited fears of a wider regional conflict, pushing crude oil prices from $72.76 a barrel last Friday to $76.34 this Friday and triggering profit booking.

Sentiment improved towards the end of the week after TCS’s June-quarter earnings marginally exceeded revenue expectations and reports suggested Washington and Tehran were continuing diplomatic talks despite the recent exchange of fire.

“Friday’s rebound was supported by both fundamental factors and short covering,” said Rajesh Singla, chief executive officer and fund manager at Alpha AMC. “Easing geopolitical concerns and TCS’s better-than-expected revenue helped the market recover. However, the sustainability of the rebound will depend on whether upcoming IT results confirm demand stability and whether tensions in West Asia remain contained.”

TCS reported revenue of $7.62 billion for the April-June quarter, up 0.04% sequentially and 2.7% on a yearly basis, although profits declined 1.3% on a quarterly basis and 2.2% year-on-year. It also announced a dividend of ₹12 per share.

Experts said the results indicated that demand was not as weak as feared, but margin pressure kept the broader IT outlook mixed. TCS’s operating margin fell 130 basis points (bps)—100 bps equal 1%—from the preceding quarter to 24% in Q1 of FY27.

Investors will now look to results from HCL Technologies on 13 July, followed by Wipro and Tech Mahindra on 16 July, for confirmation that Friday’s rally in IT stocks has legs.

Prasenjit Paul, fund manager at 129 Wealth and research analyst at Paul Asset, remained cautious, arguing that the IT sector continued to face structural disruption from artificial intelligence (AI), which could automate parts of traditional IT services and put pressure on the valuation premium enjoyed by large technology companies.

Despite the broader weakness, real estate was the week’s best-performing sector, with the BSE Realty index gaining 5.4%. This was followed by consumer durables advancing 2.3%, while information technology gained 1.9%.

Pratyush Pandey, founder of AARE Consulting, said real estate continued to benefit from healthy residential demand, strong office leasing and sustained infrastructure investment. He expects real estate, infrastructure, select financials and large-cap IT to remain market leaders, supported by earnings visibility and domestic liquidity.

In contrast, the BSE Services index declined 1.3%, while FMCG and automobile stocks fell 1.2% and 0.6%, respectively, during the week.

Singla attributed FMCG’s weakness to profit booking after earlier gains, as investors shifted away from defensive sectors when risk appetite improved. Paul remained positive on realty and pharma but cautious on FMCG because of slower earnings growth and expensive valuations.

Going forward, corporate earnings will remain the main trigger next week. Apart from the technology companies, other large-cap results coming in include those of HDFC Life Insurance on 15 July, Jio Financial Services on 16 July, and...