Tale of the Tape 

Good evening boys and girls. Markets climbed higher for a second straight week!

Nifty and Sensex gained another half a percent on Friday. Easing geopolitical tensions following the Gaza peace accord, hopes of a US-India trade deal and FII buying boosted sentiment. Going forward, markets will keep a close eye on the Q2 earnings season to confirm growth trends.

Broader markets also saw strong buying. The advance-decline ratio (3:2) was in favour of the bulls. Except for Metals (-0.9%), all the other sectors ended in the green. PSU Banks and Real Estate stocks jumped the most; +1.7% each.

In today’s issue of the Daily Rip, we breakdown TCS’s Q2 results + big AI plans, IPO review of Rubicon Research and Canara Robecco AMC, WTF is happening to Silver ETFs and Natco Pharma’s big legal win.

Honorable mentions:

Pharma stocks like Divi’s Lab (+6%) and Neuland Lab (+4%) were in focus after the US Senate passed the Biosecure Act. Tata Elxsi fell -3% on weak Q2 results.

Check out the NSE 500 heatmap:

Earnings
TCS Q2 Review

TCS (-1%) kicked off Q2 earnings season! PS - muted earnings with a slightly confusing AI pivot thrown in. There’s a lot to unpack here, so let’s get into it. 

TCS topline was up +0.8% QoQ and beat Street estimates. FYI - this comes after two quarters of decline, so that’s a relief. The key North America market was flat YoY and 4 out of 7 verticals shrank YoY too. Margins were up, but that was mostly due to favorable forex movement. Deal bookings came in at $10 billion vs $9.4 billion in Q1, but at this point, nobody bets on those actually converting anymore. PS - the bottomline missed expectations, but that's due to a Rs 1,135-cr one-off. 

Then there’s the AI stuff. TCS will set up 1GW in datacentre capacity over the next 6 years for an investment of $6-7 billion. That’s a STEEP bill, but will be funded through debt + equity and have external partners. So, WTF is it going to use it for? TCS says hyperscalers & AI firms will rent compute capacity - aka a passive role rather than using it for itself. Its niche will be GOI projects and companies with sovereign data needs. This is cool but it’s unclear what exactly this has to do with IT services aka TCS’s core business. FWIW, the management says it will take 18-24 months for this vertical’s revenue to start showing up. 

TL;DR: Another rough quarter and not one where you can really say things have bottomed out. The AI bandaid is cool -- and far better than spending on more share buybacks -- even if we don’t know how it ties into the bigger picture. Analysts are divided; JPMorgan has upped its target price to Rs 4,050 p/sh (vs Rs 3,900 p/sh earlier), but Nuvama has cut its target to Rs 3,650 p/sh (vs Rs 3,950 earlier).

Specials
3 Stocks On Traders’ Radar

Wondering what stocks the pros are watching right now? In our latest video, we reveal three stocks that SEBI RAs have recently added to their Stocktwits watchlist.