Kotak Institutional Equities has announced that it is downgrading Tata Consultancy Service (TCS), which is India’s leading IT service provider, to 'reduce' from 'add' even after the company reported a better expected results figures recently.
The company said that it is downgrading TCS due to concerns relating to valuations and profitability in the industry. “We believe that slowdown and lack of consolidation in the sector will manifest in reduced pricing power and profitability for TCS and the industry,” the company said in a note on Friday. Kotak has also reduced its target price to 1,125 rupees from 1,280 rupees.
TCS posted better than expected results Street estimates in the June quarter. The outsourcing firm has said that it is confident is confident of surpassing the growth forecast of 11-14 per cent for this fiscal year set by trade body Nasscom.
TCS does not make revenue or profit predictions. The company’s shares rose 2.1 percent to 1,262.30 rupees at the time of reporting this morning. The shares rose the most in more than two months investors shunned Infosys in favor of TCS.