Wipro Share Price Jumps 8%; Bullish Breakout on Technical Charts after Strong Quarterly Results

Wipro Share Price Jumps 8%; Bullish Breakout on Technical Charts after Strong Quarterly Results

Wipro reported strong quarterly results and the stock opened almost 8 percent higher in today's session. The stock touched intraday high at Rs 305 by the time of publication of this report. The stock is close to its 52-week highs and can give a positive breakout.

Overview of Wipro’s Stock Performance

Wipro's stock opened at Rs 302.00 today, with an intraday high of Rs 305.40 and a low of Rs 296.95. The stock's 52-week high stands at Rs 320.00, while its 52-week low is Rs 208.50, highlighting a substantial recovery in the past year.

The company’s solid fundamentals, coupled with the IT sector's resurgence post-pandemic, have kept Wipro’s valuation competitive. Recent financial reports emphasize Wipro's focus on expanding its digital services portfolio, which accounts for a significant portion of its revenue.

Key Financial Highlights of Q3

Consolidated Net Profit Growth:
Wipro reported a 4.5% quarter-on-quarter (QoQ) increase in net profit, reaching Rs 3,354 crore for the December quarter. This strong profit growth reflects the company's robust cost management and operational efficiencies.

Marginal Revenue Growth:
Revenue for the quarter rose slightly by 0.1% QoQ to Rs 22,319 crore. While the revenue uptick was modest, it underscored the IT giant's ability to maintain stable top-line growth in a challenging macroeconomic environment.

Three-Year High Operating Margins:
Wipro's operating margins reached 17.5%, the highest in three years. This was fueled by sustained operational efficiencies and cost optimization, marking the fourth consecutive quarter of margin expansion. According to CFO Aparna Iyer, this consistent improvement underscores Wipro's disciplined execution and focus on profitability.

Brokerage Reactions and Analyst Upgrades

Positive Take from Nomura:
Nomura lauded Wipro's Q3 performance, particularly its margin expansion, which exceeded expectations. The brokerage retained its ‘buy’ rating on the stock, setting a target price of Rs 340.

Earnings Per Share (EPS) Estimates Revised:
On the back of strong margin growth, Nomura raised its FY25-27 earnings-per-stock (EPS) estimates for Wipro by 2-5%, reflecting confidence in the company's ability to sustain profitability improvements.

What Drove the Margin Expansion?

Operational Efficiencies:
Wipro's continued focus on streamlining its operations has been pivotal in achieving consistent margin growth. Process optimizations and strategic alignment of resources contributed significantly to this improvement.

Cost Optimization:
Through effective cost-cutting measures, including better vendor negotiations and reduced discretionary spending, Wipro successfully boosted its profitability.

Strategic Focus on High-Margin Services:
The company has also been strategically expanding its portfolio of high-margin services, further enhancing its financial health and competitive positioning.

Stock Outlook: A Balanced Perspective

While Wipro's Q3 results showcase its operational resilience, the modest revenue growth may signal headwinds in the broader IT services sector. However, the continued expansion in margins paints a positive picture for investors.

Investment Takeaway:

Short-Term View: Investors can consider Wipro as a stable option in the IT services sector, especially given its ability to consistently improve margins.
Long-Term Perspective: With a strong focus on cost efficiency and high-margin services, Wipro is well-positioned to capitalize on digital transformation trends globally.

Analyst Recommendations

Recent analyst reports indicate a cautious yet optimistic stance on Wipro.

Jefferies maintains a "Buy" rating with a target price of Rs 330, citing Wipro's robust deal pipeline and focus on cost optimization.
Motilal Oswal has a "Neutral" rating, highlighting concerns over slowing global IT spending while appreciating its consistent dividend payouts.
These recommendations suggest that while the stock has potential, macroeconomic uncertainties could weigh on its growth trajectory.

Technical Analysis: A Deeper Dive

Candlestick Patterns:
On the daily chart, Wipro formed a "Hammer" candlestick pattern on a recent trading session, signaling potential bullish momentum. This pattern indicates that buyers are stepping in after a period of selling pressure, which could lead to short-term gains.

Fibonacci Levels:
The Fibonacci retracement levels for Wipro, calculated from the 52-week high of Rs 320.00 to the 52-week low of Rs 208.50, are:

Fibonacci Level Price (Rs)
23.6% 233.72
38.2% 257.19
50% 264.25
61.8% 281.31
100% 320.00

The stock is currently trading near the 61.8% retracement level, which acts as a critical resistance point. A decisive breakout above this level could propel the stock toward its recent highs.

Support and Resistance Levels:
Immediate Support: Rs 295.00
Immediate Resistance: Rs 310.00
Major Resistance: Rs 320.00
A breach of the Rs 310.00 resistance could pave the way for further upward movement, while a dip below Rs 295.00 may indicate short-term weakness.

Key Competitors: Infosys and TCS

Infosys: Trading with a P/E ratio of 28.12, Infosys remains a leader in large-scale digital transformation projects. Its consistent financial performance and focus on high-margin services give it a competitive edge.
TCS: With a robust market capitalization exceeding Rs 12 lakh crore, TCS dominates the IT sector. Its strong foothold in BFSI and retail verticals makes it a formidable competitor.
Wipro's diversification into emerging technologies and cost leadership strategy help it stand out, but the competitive landscape requires continuous innovation.

Future Outlook and Investment Strategies

Wipro’s focus on cloud, AI, and automation solutions positions it well for long-term growth. The company is also actively pursuing acquisitions to expand its global footprint and enhance service offerings.

Actionable Insights for Investors:
Short-term traders: Watch for a breakout above Rs 310.00 for potential gains.
Long-term investors: Consider accumulating the stock at current levels, especially if it dips toward Rs 295.00, as the IT sector remains resilient.
Risk factors: Global IT spending slowdowns and rupee fluctuations could impact earnings.

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