Here are the reasons for the sharp fall in TCS:
1. The TCS management warned analysts about the possibility of lower margins in the second quarter. Q2 earnings before interest and tax (EBIT) margins are seen growing at a slower pace than the 27.5 per cent in the first quarter.
2. The TCS management also expects Q2 volume growth to be slower than the 5.3 per cent in the June quarter.
3. The company has increased on-site hiring in the Second quarter, which may result in higher salaries.
4. TCS also cited higher growth in the APAC region, where margins are lower than average.
5. Brokerages are not upbeat on the stock. Global brokerage CLSA said over ownership makes the risk-reward for the stock further unfavourable at current levels. We will use the recent strength to pare position in the stock.