TCS: Range bound between 2500-2800 in the near term ?

Technically, TCS (CMP: 2583), has immediate support of 2569-2550 zone and below that 2498-2474 area should provide positional support as of now. Consecutive closing below 2474, TCS could fall to 2426-2345 & below that 2238-2150 area (low probability in the current market conditions).

On the up side, sustaining above 2570-2618 zone, immediate target should be 2655-2690 and consecutive closing above 2690, short term target should be 2745 and mid term target may be 2810-2840. In the long term, sustaining above 2840 area, it may scale around 3150.

QTR-4 result published yesterday slightly above/in line with street estimates, except one time bonus to employees to the tune of  INR .2628 Cr. This is done, possibly in order to reverse the growing attrition of the talented man power & performers required for the IT industry. But this might be a bench mark & example for other companies in this sector to follow and this may cast a negative effect.

Apart from this issue of one time bonus, all the other key aspects like revenue, guidance , margins, customer additions etc are in line with market expectations.

Going ahead, investments in digital platforms, cloud technology, automation, expected increase in discretionary spending for IT, gradual to strong recovery in EU-US and also our own "Digital India" theme may provide ideal growth springboard for FY:16-17, which may translate into actual sequentially higher EPS for TCS.

As par BG metrics of quick TF model, median valuation of TCS is around 2650, considering its current TTM EPS of around 110.77. If we assume, projected FWD EPS of around 173 (FY-17), median value may be around 3300. Another factor is that, TCS is a high dividend paying company and if we take the Div factor along with EPS, median value may be 3000-3500 (FY:16-18)

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	LONG TERM	SHORT TERM	MEDIAN VALUE	200-DEMA	10-DEMA
TCS	110.77	251.16	24.39	2599.77	2658.04	2628.91	2501.71	2615.11

TCS

173

447

24.39

3248.98

3321.80

3285.39

2501.71

2615.11