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Economy

Infosys Considers Buyback: Will TCS Investors Follow Suit?

by Daniel Foster - Senior Editor, Economy
written by Daniel Foster - Senior Editor, Economy


Infosys and TCS Eye Share Buybacks Amidst Positive Market Signals

Mumbai, India – A meeting of the Infosys board is scheduled for today, September 11th, to deliberate on potential share repurchase proposals. Simultaneously, financial analysis from Hong Kong-based CLSA suggests a possible acceleration of similar considerations at Tata consultancy Services (TCS).

TCS Shares receive Positive Assessment

Table of Contents

Currently, TCS stock is being traded at Rs 3,114 as of midday.CLSA has reaffirmed an ‘Outperform’ rating for TCS, projecting a significant 38 percent increase in share value, setting a target price of Rs 4,279. This optimistic outlook arrives despite considerable global economic uncertainties, as CLSA anticipates stronger international expansion for TCS in the Fiscal year 2026.

Recent Buyback History

TCS has consistently utilized share buybacks as a means of returning value to shareholders. Past buybacks have ranged from Rs 16,000 crore in 2017 to Rs 18,000 crore in 2022, typically executed through a tender offer process.The company’s most recent buyback, completed in december 2023, involved a Rs 17,000 crore investment in repurchasing approximately 4.09 crore shares, representing 1.12 percent of its outstanding capital,at a price of Rs 4,150 per share.

Infosys’s Potential Buyback

If approved, this would mark the fifth significant share repurchase initiative by Infosys as 2017. Market analysts predict a potential buyback value for Infosys between Rs 10,000 and rs 14,000 crore, representing an 18-25 percent premium over the present market price. Infosys’s last buyback, finalized in December 2022, saw the repurchase of over 50 million shares for rs 9,300 crore, with a maximum price of Rs 1,850 per share utilizing the open market route.

Understanding Share Buybacks

A share buyback, also known as a stock repurchase, involves a company reinvesting in itself by acquiring its own shares from the open market. This strategy typically aims to reduce the total number of shares available, potentially boosting per-share earnings and signaling the company’s confidence in its future performance. It’s a prevalent method for corporations to distribute excess capital to investors.

Company Last Buyback Value (INR Crore) year Buyback Method
TCS 17,000 2023 Tender Offer
Infosys 9,300 2022 Open Market
TCS (Previous) 18,000 2022 Tender Offer

Pro Tip: Share buybacks can be a positive signal for investors, indicating that the company believes its stock is undervalued, but they aren’t a guaranteed path to increased returns.

The Broader Context of Share Buybacks

The prevalence of share buybacks among large tech firms, like TCS and Infosys, reflects a broader trend in corporate finance. According to a report by S&P Global Market Intelligence, U.S. companies announced a record $882 billion in share repurchase programs in 2023. These programs are often driven by substantial cash reserves and a desire to return capital to shareholders in a tax-efficient manner.

Tho, the practice of share buybacks isn’t without its critics. Some argue that companies should instead invest in research and development, employee wages, or othre growth initiatives. The debate highlights the complex considerations influencing corporate financial decisions.

frequently Asked Questions About Share Buybacks

  • What is a share buyback?
    A share buyback is when a company uses its funds to repurchase its own outstanding shares from the market.
  • Why do companies initiate share buybacks?
    companies undertake share buybacks to reduce the number of outstanding shares, potentially increasing earnings per share and shareholder value.
  • What does a CLSA ‘Outperform’ rating mean?
    An ‘Outperform’ rating from CLSA indicates that the firm believes TCS shares are expected to deliver returns above the market average.
  • How does a buyback affect the stock price?
    Reducing the supply of shares can create demand for the stock, and also make the remaining shares more valuable.
  • Is a share buyback a better choice to dividends?
    it depends on investor preference and tax implications. Dividends provide immediate income, while buybacks can lead to long-term capital appreciation.
  • What is a tender offer buyback?
    A tender offer buyback allows shareholders to sell their shares directly to the company at a predetermined price.
  • What is the role of the board in a share buyback?
    the board of directors must approve the share buyback proposal to ensure it aligns with the company’s financial strategy and shareholder interests.

What are yoru thoughts on share buybacks as a means of returning value to shareholders? Do you think companies should prioritize buybacks over other investments?

Share this article and let us know your feedback in the comments below!


What factors might influence TCS’s decision to initiate a buyback following Infosys’ consideration?

Infosys Considers Buyback: Will TCS Investors Follow Suit?

Infosys Buyback Announcement – A Deep Dive

Infosys’ recent consideration of a share buyback has sent ripples through the Indian IT sector, particularly sparking debate amongst investors of Tata Consultancy Services (TCS). A stock buyback, also known as a share repurchase, involves a company using its cash reserves to repurchase its own outstanding shares from the market. This reduces the number of shares available, potentially boosting earnings per share (EPS) and signaling confidence in the company’s future prospects.Infosys’ move, reportedly valued at around $4 billion, comes amidst a period of relative stability and strong cash generation. This has naturally led investors to question whether TCS, a market leader with substantial cash holdings, will mirror this strategy.

Why Infosys is considering a Buyback

several factors likely contribute to Infosys’ exploration of a buyback:

Strong Financial Position: Infosys boasts a robust balance sheet with meaningful free cash flow. A buyback is a logical way to deploy this capital.

Undervaluation Concerns: Management may believe the current market price doesn’t fully reflect the company’s intrinsic value. A buyback can definitely help address this perceived undervaluation.

Shareholder Returns: Buybacks are a direct way to return value to shareholders, alongside dividends.

Limited Acquisition Opportunities: A lack of compelling acquisition targets can also push companies towards buybacks as an alternative use of funds.

Market Sentiment: Positive market conditions and investor appetite for returns can encourage buyback announcements.

TCS and Share Buybacks: A Historical Outlook

TCS isn’t a stranger to share buybacks. The company has executed multiple buybacks in the past, demonstrating a willingness to return capital to shareholders.

2018 Buyback: TCS completed a ₹16,000 crore buyback, its largest to date.

2020 Buyback: A further ₹4,500 crore buyback was announced.

2022 Buyback: TCS approved a ₹5,325 crore buyback offer.

These past actions suggest TCS recognizes the benefits of buybacks and isn’t hesitant to utilize them when deemed appropriate.However,each buyback has been carefully considered based on prevailing market conditions and the company’s strategic priorities. analyzing these past TCS buybacks provides valuable insight into their decision-making process.

Will TCS Announce a Buyback Now? Key Factors to Consider

The likelihood of TCS following Infosys’ lead hinges on several critical factors:

Cash Reserves: TCS currently holds substantial cash and equivalents. as of the latest quarterly report, these reserves are significant enough to comfortably fund a substantial buyback.

Order Book & Growth Outlook: TCS’s order book and projected revenue growth will heavily influence the decision. Strong growth prospects might lead them to prioritize investments over buybacks.

Valuation Multiples: Comparing TCS’s valuation multiples (P/E ratio, Price-to-Book ratio) to its peers will be crucial. If TCS is perceived as undervalued,a buyback becomes more attractive.

Capital Allocation Strategy: TCS’s overall capital allocation strategy, including dividend payouts, potential acquisitions, and internal investments, will play a key role.

Investor Pressure: Increased investor demand for returns could put pressure on TCS management to consider a buyback. shareholder activism can sometimes influence these decisions.

Benefits of a TCS Buyback for Investors

A TCS buyback could offer several benefits to investors:

Increased EPS: Reducing the share count boosts earnings per share, a key metric for investors.

Share Price Appreciation: Buybacks can create demand for the stock,potentially driving up the share price.

Signaling Confidence: A buyback signals management’s confidence in the company’s future prospects.

Improved Return on Equity (ROE): By reducing equity, a buyback can improve ROE.

Tax Efficiency: Buybacks can be more tax-efficient for some investors compared to dividends.

Potential Downsides & Considerations

While buybacks are generally viewed positively, there are potential downsides:

Opportunity Cost: The cash used for a buyback could be used for other purposes, such as acquisitions or research and development.

Artificial Inflation of Metrics: Buybacks can artificially inflate EPS without necessarily improving underlying business performance.

* Market Perception: Some investors may view buybacks as a sign that the company lacks attractive investment opportunities.

The impact on IT Sector Sentiment

Infosys’ potential buyback and the speculation surrounding a TCS response are already impacting the broader IT sector sentiment. Investors are closely monitoring the situation, and any announcement from TCS will likely have a ripple effect on other IT companies. The focus on IT stock performance is heightened, with analysts predicting increased volatility in the short term.

Real-World Example: Apple’s Consistent Buybacks

Apple provides a compelling case study of a company consistently utilizing buybacks to return value to shareholders.Over the past decade,Apple has spent hundreds of billions of dollars on share repurchases,considerably reducing its share count and boosting EPS.

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Economy

Mid and Small-Cap Earnings Poised to Surpass Nifty 50 Amid Valuation Concerns

by Daniel Foster - Senior Editor, Economy
written by Daniel Foster - Senior Editor, Economy

Here’s a breakdown of the article, focusing on the key points and questions asked:

Expert’s View on Market Direction:

No Cliffhanger: The expert doesn’t anticipate a market “cliff dive.”
 Overshooting Likely: Due to earning support and RBI actions, the market is more likely to overshoot expectations (perform better than expected) rather than undershoot or stay neutral.

Sector-Specific Views:

Pharma:
 Positive Stance: The expert has liked the pharma sector for a while.
200% Tariff Overhang: The expert dismisses the idea of a 200% tariff on pharma as unfeasible.they believe there’s already a holiday on such tariffs for the next 1-1.5 years. Even after that,they don’t see such a high tariff materializing,as it would be detrimental to the US healthcare sector,which relies on generics.
 Tariff Impact (India-US):
26% Tariff: Considered “taken very adversely” by the market. 10-15% Tariff: Would be “positive for the markets” and a “relief.”
More than 15%: Any number in the vicinity of 20% or 26% would be viewed “negatively.”
 Other Tariffs (Russia Oil): More importance should be given to potential tariffs on oil imports from Russia.Impact of Tariffs on US Macros:

Harmful in Short-Term: The expert believes tariffs are currently doing more harm than good to the US economy.
 Inflationary: Tariffs will ultimately be paid by american consumers, leading to inflation.
US Dollar Weakness: Tariffs are putting pressure on the US dollar, which is seen as headed “on the downside.”
 benefit to Emerging Markets: A weaker US dollar would be beneficial for emerging markets like India, possibly attracting more flows.

What specific economic factors are driving the outperformance of mid and small-cap earnings compared to the Nifty 50?

Table of Contents

Mid and Small-Cap Earnings Poised to Surpass Nifty 50 Amid Valuation Concerns

the Shifting Landscape of Indian Equity

for years, the Nifty 50 has been the benchmark for Indian equity market performance. However, a compelling narrative is unfolding: mid-cap and small-cap earnings are increasingly demonstrating the potential to outperform their large-cap counterparts. This isn’t to say the Nifty 50 is losing relevance, but rather that the growth engine is shifting, presenting unique opportunities for investors. This article dives into the factors driving this trend, the associated valuation concerns, and how investors can navigate this evolving market. We’ll explore small-cap returns, mid-cap growth stocks, and the broader implications for Indian stock market analysis.

Why Mid & Small Caps Are Gaining Momentum

Several key factors are contributing to the rising prominence of mid and small-cap companies:

Economic Recovery & Domestic Demand: A strengthening Indian economy, coupled with a surge in domestic demand, is disproportionately benefiting smaller companies. They are often more closely tied to local consumption patterns and less reliant on global economic conditions than larger, export-oriented businesses.

Government Initiatives: Policies like “Make in India” and infrastructure development are creating a favorable environment for mid and small-cap companies to expand and innovate. These initiatives frequently enough lead to increased order books and revenue growth.

Sectoral Tailwinds: Specific sectors,such as financials (notably NBFCs),specialty chemicals,and infrastructure,are witnessing robust growth,and many key players reside within the mid and small-cap segments.

Base Effect: Following a period of underperformance, mid and small caps are benefiting from a favorable base effect, leading to higher percentage growth in earnings.

Innovation & Agility: Smaller companies often exhibit greater agility and are quicker to adapt to changing market dynamics and embrace new technologies. This allows them to capitalize on emerging opportunities.

Earnings growth: A Comparative Analysis

Recent data suggests a clear divergence in earnings growth trajectories. While the Nifty 50 continues to deliver steady, albeit moderate, growth, mid and small-cap companies are reporting significantly higher earnings increases.

Nifty 50 Earnings Growth (Trailing Twelve Months): Averaging around 12-15% (as of Q1 2025).

Mid-Cap Earnings Growth (trailing Twelve Months): Exceeding 20-25% in many sectors.

small-Cap Earnings Growth (Trailing Twelve months): Demonstrating growth rates of 30% or higher in select segments.

This disparity is particularly noticeable in companies benefiting from import substitution and increased private capital expenditure. Analyzing earnings estimates and future growth potential is crucial for investors.

The Valuation Puzzle: Are Mid & Small Caps Overvalued?

The strong performance of mid and small-cap stocks has inevitably led to valuation concerns. Many indices are trading at premiums to their past averages, raising questions about sustainability.

P/E Ratios: Mid and small-cap indices currently trade at higher P/E (Price-to-Earnings) ratios compared to the Nifty 50.

Price-to-Book Ratios: Similar trends are observed in price-to-Book ratios, indicating that investors are willing to pay a premium for the growth potential of these companies.

* Market sentiment: Positive market sentiment and abundant liquidity have contributed to the elevated valuations.

However, it’s important to note that high valuations don’t necessarily equate to overvaluation. If earnings growth continues to exceed expectations, current valuations could be justified.A key aspect of fundamental analysis is determining whether the price accurately reflects the underlying value.

Navigating the Risks: Due Diligence is Paramount

Investing in mid and small-cap stocks carries inherent risks.Here’s how to mitigate them:

  1. Thorough Research: Conduct in-depth research on the company’s financials, management team, competitive landscape, and growth prospects.
  2. Diversification: Don’t put all your eggs
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Economy

Monday’s Market Movers: 10 Key Factors to Watch

by Daniel Foster - Senior Editor, Economy
written by Daniel Foster - Senior Editor, Economy

Breaking News: Market Buzzes as Key stocks Show Divergent Trends on Indian Exchanges

Mumbai, India – Indian stock markets experienced a day of notable activity, with several large-cap companies dominating trading volumes while other stocks showed significant buying or selling pressure. The overall market sentiment, as indicated by the BSE, leaned towards bearishness, with a majority of stocks declining.

In terms of value, Reliance Industries emerged as the most active stock on the BSE, with traded value reaching Rs 3,427 crore. Bharti Airtel followed closely with Rs 2,522 crore, and Tata Consultancy Services (TCS) recorded Rs 2,516 crore. Other prominent stocks in value terms included hindustan Unilever (HUL) at Rs 1,821 crore, Infosys at Rs 1,812 crore, BSE at Rs 1,710 crore, and HDFC Bank at Rs 1,244 crore. High trading turnover in these counters highlights their significant market participation.

On the NSE, the focus shifted to volume. JP Power led the pack with a colossal 49.97 crore shares traded. Vodafone Idea also saw substantial activity with 34.18 crore shares changing hands. Sagility India (6.94 crore shares), YES Bank (4.32 crore shares), IREDA (4.05 crore shares), NTPC Green Energy (3.76 crore shares), and NMDC (3.55 crore shares) rounded out the most active stocks by volume.

A discernible buying interest was evident in select stocks, including Glenmark Pharma, Netweb Technologies, Asahi India Glass, Piramal Enterprises, HUL, Anand Rathi Wealth, and EID Parry, indicating positive investor sentiment towards these specific companies.

Conversely, stocks such as IREDA, ABB Power, Elecon Engineering, Metropolis Healthcare, BSE, BEML, and Raymond Lifestyle experienced significant selling pressure, suggesting a bearish outlook from investors in these counters.

Adding to the day’s market dynamics, over 133 stocks achieved new 52-week highs, demonstrating strong upward momentum for a segment of the market. However, this was contrasted by 42 stocks that hit their 52-week lows, pointing to considerable weakness in other areas.

the market sentiment was predominantly bearish on the BSE, with 2,516 stocks declining out of the 4,165 traded. only 1,503 stocks saw advances, while 146 remained unchanged, underscoring a cautious trading surroundings.

Evergreen Insights: Navigating Market Volatility – What Today’s Trends Tell Us

Today’s trading session on Indian exchanges provided a clear snapshot of market dynamics, offering valuable lessons for investors. The significant trading values of major corporations like Reliance Industries, Bharti Airtel, and TCS underscore their outsized influence on market performance and their role as bellwethers for investor sentiment in the large-cap space. Their high turnover often reflects institutional activity and broad market interest.

The divergence between value and volume leaders is also an important observation. While value leaders frequently enough indicate the stocks with the most capital being traded, volume leaders, particularly in the mid and small-cap segments (such as JP Power and Vodafone Idea in this instance), can signal increased retail participation or speculative interest. High volumes in these stocks can precede significant price movements, either positive or negative.

The presence of stocks showing strong buying interest, like glenmark Pharma and HUL, alongside those facing selling pressure, such as IREDA and ABB Power, illustrates the selective nature of market movements. Investors are actively differentiating between companies based on their perceived fundamentals, future prospects, and current valuations. Identifying these “stocks showing buying interest” can be an important strategy for uncovering potential growth opportunities.

Furthermore, the phenomenon of stocks hitting 52-week highs and lows provides a crucial indicator of momentum. A large number of stocks reaching new highs suggests a generally buoyant market or strong sectorial performance. Conversely, a significant number hitting lows indicates widespread weakness or sector-specific headwinds. Understanding these trends helps gauge the overall risk appetite in the market.the bearish sentiment reported on the BSE, with more decliners than advancers, serves as a reminder of the inherent volatility in equity markets. Even when leading stocks are active, a broader market downturn can impact overall portfolio performance. This highlights the importance of diversification and a well-considered investment strategy that accounts for potential market corrections. for seasoned investors,periods of bearish sentiment can also present opportunities to acquire quality stocks at more attractive valuations.

How do early company reports influence investor expectations for the week?

Table of Contents

Monday’s Market Movers: 10 Key Factors to Watch

Global Economic Data Releases

The start of the week is often dictated by overnight economic data from Asia and Europe. Keep a close eye on:

Chinese Industrial Production: A key indicator of global manufacturing health. Any meaningful deviation from forecasts can ripple through commodity markets and impact global supply chains.

Eurozone PMI (Purchasing Managers’ Index): Provides a snapshot of economic conditions in the Eurozone, influencing the Euro’s strength and European stock markets. Focus on both manufacturing and services PMIs.

UK Employment Data: A crucial metric for the Bank of England, impacting expectations for future interest rate hikes or cuts. Strong employment figures generally support the Pound.

Currency Fluctuations & Forex Trading

Foreign exchange (forex) markets are highly sensitive to news and data. Major currency pairs to monitor include:

USD/JPY: Heavily influenced by US interest rate expectations and the Bank of Japan’s monetary policy.

EUR/USD: Driven by economic divergence between the Eurozone and the US, as well as geopolitical events.

GBP/USD: Sensitive to UK economic data, Brexit-related news, and Bank of England policy.

Impact on Equities: currency movements directly affect multinational corporations’ earnings, impacting stock prices. A stronger dollar, such as, can hurt US exporters.

Commodity Price Movements

Commodity markets frequently enough lead or lag broader market trends. Key commodities to watch:

Crude Oil (Brent & WTI): Geopolitical tensions, OPEC+ production decisions, and global demand forecasts are primary drivers. Monitor for supply disruptions.

Gold: Frequently enough seen as a safe-haven asset,gold prices tend to rise during times of economic uncertainty or geopolitical instability.

Industrial Metals (Copper, Aluminum): Demand from China and global manufacturing activity are key factors. Copper is often considered a leading economic indicator.

Agricultural Commodities (Wheat,Corn,Soybeans): Weather patterns,supply chain issues,and geopolitical events (like the conflict in Ukraine) significantly impact prices.

Geopolitical Risks & Global Events

Unexpected geopolitical events can trigger significant market volatility.

Ongoing Conflicts: The situation in Ukraine and the Middle East continue to be major sources of uncertainty,impacting energy prices and global risk sentiment.

Political Instability: elections or political crises in major economies can create market jitters.

Trade Wars & Tariffs: Escalating trade tensions between major economic powers can disrupt global supply chains and hurt economic growth.

Interest Rate Expectations & Central Bank Policy

Central bank decisions have a profound impact on financial markets.

Federal Reserve (US): Monitor statements from fed officials and economic data releases for clues about future interest rate policy.

European Central Bank (ECB): The ECB’s response to inflation and economic growth in the Eurozone is crucial.

Bank of England (BoE): The BoE’s actions are heavily influenced by UK inflation and employment data.

Bond Yields: Rising bond yields can signal expectations of higher interest rates and can put pressure on stock prices.

Earnings Season Kick-Off (If Applicable)

If it’s earnings season, initial reports can set the tone for the market.

Early Reporters: Pay attention to the results of major companies that report early in the week. their performance can provide insights into broader industry trends.

Guidance: Company guidance for future earnings is often more important than current results.

Sector Performance: Identify which sectors are leading and lagging, and look for potential opportunities.

Technology Sector Trends

the technology sector often drives market innovation and growth.

Semiconductor Industry: Monitor developments in the semiconductor industry, as it’s a critical component of many products.

artificial Intelligence (AI): Developments in AI continue to attract significant investment and drive market enthusiasm.

Big Tech Earnings: Earnings reports from major technology companies (Apple, Microsoft, Amazon, Google) can have a significant impact on the overall market.

Retail Sales Data & consumer Spending

Consumer spending is a major driver of economic growth.

*US

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