Rupee Plunge Triggers Citi To Raise Target Price Of TCS, Infosys, Wipro And Other IT Stocks
Citi's target price revision is driven by the fall in rupee, which bodes well for IT companies as they bill the majority of their clients in dollars.
Citi Research on Wednesday raised its target price for major Indian information technology stocks, including those of Tata Consultancy Services Ltd., Infosys Ltd., and Wipro Ltd., to "incorporate changes in the exchange rate."
The upward revision is triggered by the ongoing plunge in the Indian rupee, which bodes well for IT companies as they derive a major portion of their revenues from software export.
The local currency continued its slide against the greenback for the seventh consecutive session, ending at 85.65 against the dollar on Wednesday.
Here's a look at how Citi has revised the target price of some of the IT stocks:
TCS
For TCS shares, the target price has been raised to Rs 3,950 from Rs 3,935, while the 'sell' recommendation remains unchanged, Citi said in a note. The target price marked a downside of 3.8% against the last trading price.
In a bull case scenario, the broking sees TCS' stock price at Rs 4,890, which suggests a potential upside of 19%. Under this scenario, it is assumed that the rupee's depreciation will continue up to 87.5 against the dollar, the broking said.
In a bear case scenario, the target price slips to Rs 3,400, marking a downside of 17%. In this scenario, it is assumed that the rupee strengthens to 83.5 against the dollar.
Infosys
Citi maintained a 'neutral' tag for Infosys while raising the target price from Rs 1,965 to Rs 2,035, which suggests an upside of 7.8% against the last traded price. This upgradation comes with the assumption that the rupee stabilises around 85.5 against the dollar.
In a bull case scenario, Citi sees the stock rising to Rs 2,355, marking a potential upside of 25%. This requires the rupee depreciation to continue till 87.5 against the US currency.
On the flip side, the target price for Infosys' shares could slip to Rs 1,795, suggesting a downside of 4.9% in a bear case scenario. This requires the rupee recovering to 83.5 against the dollar.
Wipro
Citi, while retaining the 'sell' tag for Wipro, raised the target price for the stock to Rs 280 from Rs 250. This still marked a downside of 7.3% against the last traded price. The base case assumption is based on the expectation of the rupee remaining at the 85.5 level against the dollar.
In a bull case scenario, Wipro may scale the Rs 350-mark, which suggests an upside of 16%. For this, the rupee is required to depreciate to 87.5 against the greenback.
In a bear case scenario, where the rupee strengthens to 83.5, Wipro's stock is seen dwindling to Rs 250, marking a downside of 17%.
Citi, citing the changes in the currency exchange rate, has also raised HCL Technologies Ltd.'s target price from Rs 1,815 to Rs 1,915, which suggests a marginal downside of 0.3% against the last traded price. "Our neutral stance remains unchanged," the brokerage noted.
In a bull case scenario, it sees the stock scaling to Rs 2,115 if the slide in the rupee continues further. On the flip side, a strengthening in the local currency could lower HCL Tech's shares to Rs 1,715, marking a downside of 11%.
Similarly for Coforge Ltd, Citi has raised the target price to Rs 7,790 from Rs 6,720 while keeping the 'sell' recommendation unchanged. The new target price marks a downside of 19% against the last traded price.
In a bull case scenario, the brokerage sees the stock rising to Rs 10,310, marking a potential upside of 6.7%. On the other hand, the target price could dwindle to Rs 7,220, which is 25% lower as compared to the last traded price.
