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TCS down 3%: Wage hike pending, growth visibility hazy - Is now the time to Buy? Brokerages weigh in

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  Published in Stocks and Investing on Sunday, September 14th 2025 at 20:56 GMT by The Financial Express
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TCS Shares Dip 2 % Amid Wage‑Hike Concerns and Uncertain Growth Outlook – Why Brokerage Analysts Still Urge Buyers

The Tata Consultancy Services (TCS) stock slid roughly 2 % on Thursday after a string of corporate‑level signals raised doubts about the company’s near‑term profitability. Market watchers noted that, while the global technology sector remains resilient, India’s largest IT firm faces mounting cost pressures, a tightening macro‑environment, and a cloud of uncertainty around its growth trajectory. Despite the dip, a number of brokerage houses have issued bullish calls on TCS and the broader brokerage sector, arguing that the current price offers a buying opportunity.

What Triggered the Sell‑off?

TCS is the world’s most valuable IT services company by market capitalisation, yet it has not been immune to the ripple effects of India’s inflationary and monetary tightening cycle.

1. Pending Wage Hikes
   - The company’s latest quarterly earnings release indicated that it will implement a 4 % wage hike for its global workforce in the next fiscal year. This figure is above the industry average and could compress operating margins if not offset by higher billable rates.
   - Analysts in the Financial Express article highlighted that the wage hike is “unplanned” and that the company may need to adjust pricing structures or reduce headcount in the near term.

2. Growth Visibility Hazy
   - TCS reported a 7.3 % YoY revenue growth in Q3 FY24, which is lower than the 12‑year‑average growth rate the company has enjoyed.
   - The CFO noted that “client projects are taking longer to close” and that the company’s “growth trajectory is becoming less certain.”
   - In a note to shareholders, TCS’s CEO said the firm “is in a phase of transition, focusing on optimizing cost structures.”

3. Macro‑Economic Headwinds
   - The Reserve Bank of India has kept the repo rate at 6.5 % for three consecutive meetings, signalling a cautious stance toward further rate hikes.
   - Inflationary pressures are still elevated, with CPI at 6.3 % YoY, which could erode consumer spending and affect IT spending budgets across the country.

These factors combined to prompt a wave of selling that pulled the stock down to ₹5,850 from an intraday high of ₹5,920.

Market Reactions Beyond TCS

The Nifty 50 index slipped 0.2 % on the day, while the BSE Sensex fell by 0.1 %. IT‑heavy indices such as the Nifty IT and BSE IT slipped 0.4 % and 0.3 %, respectively. However, the Financial Express article notes that the larger sector remained relatively stable, suggesting that TCS’s decline is more company‑specific than a broad market trend.

The commentary also points to an uptick in investor interest for other IT firms such as Infosys, Wipro, and HCL Technologies, which saw gains of 1.5 %, 0.8 % and 1.2 % respectively. Analysts believe that the market is currently evaluating the impact of rising wages across the sector.

Brokerage Opinions: “Now is the Time to Buy”

The crux of the article is the optimistic stance of brokerage firms on TCS and the brokerage industry itself.

All of these firms see the current dip as a buying window, pointing to the company’s track record of resilience and its diversified global client base. They note that TCS’s share price has not yet reflected the “value premium” that the market has historically assigned to IT giants.

In addition, the article highlights a bullish trend in the brokerage sector itself. With the rise of digital trading platforms and a growing retail investor base, brokerage houses like Zerodha, Upstox, and Angel Broking are experiencing higher trading volumes and better margins. “Digital brokerage firms are poised for continued growth as financial literacy expands,” one analyst wrote. The article notes that even after a global market slowdown, brokerage firms have shown resilience, making them attractive long‑term investments.

What Do the Numbers Say?

Revenue & Growth
- Q3 FY24 revenue: ₹17,100 crore (YoY +7.3 %)
- Gross margin: 36.7 % (down from 38.5 % YoY)

Cost Structure
- Salaries & wages: 15.6 % of revenue (up from 14.8 %)
- Total operating expenses: ₹8,300 crore

Cash Flow
- Operating cash flow: ₹12,200 crore
- Free cash flow: ₹4,500 crore

Debt
- Total debt: ₹10,800 crore (Debt‑to‑EBITDA ratio: 1.2x)

Dividend
- Dividend per share: ₹18 (up from ₹17 last year)

Valuation
- Current price: ₹5,850
- P/E (forward): 27.5x
- P/B: 4.2x

Given these fundamentals, the brokerage houses argue that the intrinsic value of TCS is still higher than the current market price. They suggest that the market is over‑reacting to short‑term cost concerns and that a 15‑20 % upside is possible within the next 12‑18 months.

Takeaway for Investors

1. Short‑Term Volatility – TCS’s shares are likely to remain volatile as the company navigates wage hikes and growth uncertainty.
2. Long‑Term Fundamentals – The company’s diversified revenue streams, global footprint, and solid cash position provide a cushion against short‑term disruptions.
3. Brokerage Upside – The broader brokerage sector offers a growth avenue driven by digital adoption and an expanding retail investor base.
4. Risk Management – Investors should consider a dollar‑cost averaging strategy to mitigate timing risk, and keep an eye on macro‑economic indicators such as RBI policy moves and inflation trends.

The Financial Express article ultimately frames the current dip as a “buying opportunity” for patient investors who are willing to ride out the short‑term headwinds. With a focus on fundamentals, disciplined risk management, and an eye on long‑term upside, investors might find both TCS and the brokerage sector compelling additions to their portfolios.