By

Shares in Tata Consultancy Services soared more than 15 percent on Monday to their highest in more than a year after the outsourcer posted strong quarterly earnings and prompted a flurry of brokerage upgrades. 

n

Analysts said the surprising strong performance by India's top software services firm by sales helped dispel some gloom surrounding the $60 billion software and services sector. 

n

Tata Consultancy beat expectations by posting a 22 percent rise in quarterly profit late on Friday, but said the business environment remained weak and there was pressure on fees due to the global economic downturn. 

n

"TCS has continued to make long-term investments, the effect of which is partly visible in the current quarter's performance despite a tough macro," Viju George and Kunal Sangoi, analysts at brokerage Edelweiss, wrote in a report. 

n

By 0627 GMT, shares in Tata Consultancy, which has a market value of more than $17 billion, was up 15.1 percent at 499.10 rupees after having risen 15.3 percent to their highest since June 2008. The main market was up 2 percent. 

n

Edelweiss raised its earnings per share by 13 percent to 29.50 rupees for the full year to March, and forecast revenue to rise 7.4 percent. 

n

n

Citigroup, which has a buy on the stock, increased its earnings per share target for this fiscal and next year by 8.7 percent and 5.9 percent respectively. 

n

Brokerage Reliance Equities said better-than-expected results by Goldman Sachs, JPMorgan and Citigroup had raised hopes for a rise in IT spending, which would benefit Tata Consultancy that gets a bulk of its revenue from financial clients. 

n

It raised its target price on the stock to 540 rupees from 453 rupees earlier. 

n

After a scorching pace of growth for years, the export-led outsourcing sector has been battling a slowdown over the past year as top global customers struggled to stay afloat, went bust or tackled severe cost cuts, leaving little room to boost technology spending. 

n

"In our view, the IT bellwethers are giving out cautious to challenging outlooks so as not to build up expectations too much," analysts Shubham Majumder and Nitin Mohta wrote in a Macquarie research report. 

n

"We believe that early signs of a recovery are visible and that the worst is behind us." 

n

Tata Consultancy had reported a fifth consecutive quarter of single digit year-on-year quarterly profit growth in April after seeing a rise of more than 20 percent in the previous quarters, while Infosys Technologies forecast its first annual sales drop this year. 

n

Morgan Stanley said it remained concerned about risks to the sector's earnings from uncertain macro environment that could lead to slower-than-expected recovery, stagnant technology spending by clients and incremental pricing pressure. 

n

Shares in Infosys, which the market values at $22 billion, were trading up at 4.6 percent at 1,953.20 rupees and the No. 3 software services exporter Wipro was 11.3 percent up at 478.80 rupees. The sector index rose 6.6 percent. 

n

Wipro reports April-June, its fiscal first quarter, earnings on Wednesday.

n

Leave Your Comment(s)