Why TCS stock fell despite good Q3 earnings

IT giant TCS has reported third quarter numbers that were in-line with Street expectations.

However, its stock slumped on the bourses Wednesday amid flat trade.

The stock traded with over 3 per cent losses and was the worst performer on the 50-stock Nifty index in early trade.

Brokerage firm CLSA's take on TCS stock fall: Dollar revenues growth of 2.4 per cent quarter-on-quarter (4.5% in constant currency terms) is in line with moderated Street expectations.

Given its bellwether status in the Indian IT industry, TCS needed to do more on topline to revive industry-wide demand confidence which has been on hold post the Infosys report.

Lower than expected margin improvement of 2.13 per cent against expectations of 2.4-2.5 per cent dampened market sentiments.

Almost a third of incremental growth came from re-sale of equipment & software licenses. These are just pass-through revenues, says CLSA.

Its volume grew at 3.2 per cent against estimates of 4 per cent. The margin improvement was driven by forex benefits. These factors also affected the stock, says CLSA.