Tale of the Tape 

Good evening, boys and girls.

Markets were down big making it the worst week for stocks in over 2 months. A combination of domestic and global factors like weak start to the earnings season, reports of SEBI crackdown on pump-and-dump operations, and trade deal uncertainity dampened sentiment.

Consequently, broader markets got roughed up. Midcaps and Smallcaps fell nearly a percent each. The market breadth was extremely negative with over 3 stocks falling for every gainer. Barring Pharma (+0.7%) and FMCG (+0.5%), all the other sectors ended in the red. IT (-1.8%) and Auto (-1.8%) stocks got beaten up the most.

Today’s issue covers TCS Q1 earnings analysis, Glenmark Pharma’s $1.9 billion deal, trending charts and more.

Honorable mentions:

HUL (+5%) was the top Nifty gainer after appointing Priya Nair as the new MD & CEO. Zee Entertainment (-4%) was under pressure after shareholders rejected the company’s fundraising plans. PS - read our coverage from last week for more details. Bharti Airtel slipped -2% after UBS downgraded the stock to “Sell” rating (vs Neutral). Lastly, IREDA fell -6% on weak Q1 results.

Check out the NSE500 heatmap:

Earnings
TCS Q1 Review

TCS (-3.5%) Q1 results missed Street expectations. Adjusted for forex fluctuations, the company’s revenue dropped -3.3% QoQ THAT TOO IN A SEASONALLY STRONG QUARTER! To be fair, the Street didn’t have high hopes forecasting a -1.4% QoQ drop but they even underperformed that, which sucks. The slowdown was broad based with pressure across geographies and verticals. TCS blamed the unexpected weakness of uncertainty from US trade negotiations and geopolitics. 

Margins improved thanks to the ramp down of the BSNL deal. However, higher employee costs limited the upside. Q1 deal wins rose 13% YoY to $9.4 billion with a book-to-bill of 1.3x (in-line with the last 4 quarter average). The only silver lining was the addition of 6.1K people to its overall headcount (+1% QoQ). On a sidenote, they approved an interim dividend of Rs 11 p/sh. Here are the key stats: 

• CC Revenue: $7.4 billion; -3.3% QoQ 

• EBIT margin: 24.5% 

• PAT: Rs12,760 cr; +4% QoQ 

Management commentary also failed to cheer the Street. TCS said that companies are still holding back on big investments. In fact, this trend has actually gotten worse and the bar for returns has gone even higher. They remain optimistic that FY26 will be better than FY25 for international business, but admit it’s hard to say when growth will actually bounce back — it all depends on the global environment.

TL;DR - overall, it was a forgettable quarter and the management commentary was also muted. Most analysts lowered their target price estimate and see limited room for upside from current levels. Be careful guys, it’s going to be a looooooooong road to recovery.