TCS share price dips ahead of Q4 result on Thursday. Should you buy, sell or hold this IT stock?

TCS share price traded in the red on Wednesday, April 9, a day ahead of the IT giant’s March quarter results. Shares of Tata Consultancy Services (TCS) opened at ₹3,276 against its previous close of ₹3,293.55 and dropped 2.4 per cent to ₹3,215.90 during the session. Around 2 PM, the IT stock traded 1.12 per cent lower at ₹3,256.65.

TCS Q4 result preview

TCS is expected to report mixed earnings for Q4FY25 impacted by persistent regulatory and economic uncertainties. Analysts believe a deteriorating macroeconomic environment may adversely impact IT sector Q4 results and guidance for FY2026.

According to brokerage firm Motilal Oswal Financial Services, TCS may post a revenue decline of 0.5 per cent quarter-on-quarter (QoQ) constant currency (CC) as BSNL ramp-down starts taking shape.

Motilal expects TCS's BFSI to remain strong but that manufacturing will be slightly weak.

"EBIT margin may remain flat QoQ, aided by operational efficiencies, despite headwinds from talent investments. Q4 margin should be aided by BSNL tapering and pyramid benefits from early hiring in Q1 and Q2," said Motilal Oswal.

Kotak Institutional Equities forecasts flat constant-currency revenues for the international business and a $30 million decline in BSNL revenues. The constant-currency revenues could decline by 0.3 per cent.

"We expect steady deal wins of $11 billion. This is a decline from $13.2 billion last year, which included certain large renewals.

Tariffs a key challenge

Experts point out that the Indian IT sector is facing challenges due to trade war and a cautious outlook on economic growth of the US. However, TCS, being the largest IT player of the country, may endure the pain. Experts suggest investors should focus on management commentary after the Q4 numbers before taking a bet.

"TCS is poised to announce its Q4 FY25 earnings on April 10, with expectations of modest revenue growth and margin expansion. However, the IT sector faces challenges due to tariff-related uncertainties and a cautious outlook on US growth," Atul Parakh, CEO of Bigul, noted.

"TCS remains a key player in the Indian IT sector, and its performance will set the tone for the industry's earnings season. Small improvements are anticipated due to operational efficiencies offset by talent-related costs. Future guidance will be crucial in determining investor sentiment and stock price movement," said Parakh.

A major chunk of TCS' revenue comes from North America. Tariff-related uncertainty is a huge challenge for the stock.

VLA Ambala, a Sebi-registered analyst and the co-founder of Stock Market Today, pointed out that TCS derives its revenue primarily from consultancy services. It depends on North America for 47.7 per cent of its revenue, while the rest comes from other parts of the world. The UK contributes 16 per cent, India 9 per cent, and the rest of the Asia-Pacific and Middle East accounts for 7.8 per cent, with Europe making up 13.9 per cent.

"This is why I believe we may see the impact of the current tariff reflected in the company's upcoming financials and balance sheet," she said.

What should investors do with TCS stock?

Ambala said that TCS looks good for swing trading purposes. However, for investors with an outlook for more than two years, trading can be done for every 10 per cent dip, which is likely to happen after a small pullback movement. In this condition, they can opt for two strategies.

"One is neutral through options, in which at-the-money calls and puts can be bought, with an expected movement of 5 to 7 per cent within a couple of weeks. However, terrestrial traders can initiate long positions covered with puts to capture this possible upside movement directionally," said Ambala.

"I would like to remind you that hedging is crucial in every condition, especially amid the tariff threat and volatility, as TCS relies almost 50 per cent on the global market, primarily the US, for its revenue source," Ambala said.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, observed that TCS is trading near a key support zone aligned with the 50 per cent Fibonacci retracement from the COVID March 2020 low (around ₹1,506) to the August 2024 high (approximately ₹4,592).

This zone also coincides with a previous demand area, adding significance. Additionally, a bullish divergence is visible on the daily RSI, suggesting a potential reversal.

"If TCS closes above ₹3,400, an upward move toward ₹3,700 is expected. Conversely, a weekly close below ₹3,050 may trigger further selling pressure and create panic in the stock. Traders should watch these levels closely for confirmation," said Patel.

Ravi Singh, SVP of Retail Research at Religare Broking, pointed out that on charts, the stock has tested its major support of ₹3,000. It has been trading in “sell on rise” mode, and Singh expects this move to continue in the coming days.

"Investors who have prior holdings can maintain strict stop loss at ₹3,000 while traders can initiate a 'Vega positive strategy' which would involve selling ATM put option for current expiry (24 Apr) and buying ATM put option for next month expiry (29 May). This will create a long-put calendar," said Singh.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.