Why Is TCS Stock Falling? A Deep Dive into Fundamentals and Technicals

Explained Why  TCS share Price is Falling ?

The decline in Tata Consultancy Services (TCS) share price in 2025 can be attributed to a combination of fundamental, technical, and other external factors. 

Below is a comprehensive analysis based on the available information:

Fundamental Reasons

Weak Revenue Growth and Margin Pressure:

TCS reported a revenue decline in Q1 FY26 (ended June 30, 2025), with consolidated revenue at ₹63,437 crore, down 1.6% quarter-on-quarter (QoQ) and a 3.1% decline in constant currency terms. 

This was primarily due to the ramp-down of a significant BSNL contract, which contributed 85% of the revenue decline.

Key sectors like consumer business (-3.1%), life sciences & healthcare (-9.6%), manufacturing (-4%), and communication & media (-9.6%) showed declines, with India’s business dropping sharply by 21.7%.

Slower deal conversions and prolonged decision-making cycles in sectors like retail, manufacturing, and insurance have further pressured revenue growth.

Margin pressures have arisen from rising costs, including employee-related expenses, despite a slight improvement in operating margin by 30 basis points to 24.5%

Global Macroeconomic Challenges:

US Tariff Concerns: The introduction of reciprocal tariffs by the US, effective from April 2, 2025, has raised concerns about increased costs or reduced demand for Indian IT services, as the US accounts for over half of TCS’s revenue.

Global IT Spending Slowdown: 

Clients in the US and Europe are cutting discretionary IT budgets, leading to delayed or downsized deals, impacting revenue visibility and deal momentum.

Geopolitical Uncertainty: 

Global macroeconomic slowdowns and geopolitical tensions have dampened IT spending, particularly in North America, where TCS saw a 2.7% revenue decline.

Workforce Restructuring and Layoff Concerns:

TCS announced plans to cut approximately 12,000 jobs (2% of its workforce) as part of a restructuring strategy focused on AI and automation. 

This has led to negative market sentiment and employee anxiety, potentially affecting productivity.

Reports of forced resignations and a new bench policy have further heightened concerns, with allegations of coercive practices impacting the company’s reputation.

Attrition rates increased slightly to 13.8%, and onboarding delays have been noted, adding to operational challenges.

Underperformance Relative to Peers:

TCS has lagged behind competitors like Infosys (up 12%), HCL Tech (up 24%), and Wipro (up 11%) over the past year, with TCS shares declining by 10%. 

The Nifty IT index, in contrast, rose over 15%.

Competitors have benefited from stronger deal wins, strategic focus on high-growth areas like cloud services, and aggressive M&A strategies, while TCS has faced challenges in maintaining wallet share.

Deferred Salary Hikes:

TCS deferred its usual Q1 salary hikes due to an uncertain business environment and rising costs, a first in its history. 

This decision has negatively impacted investor and employee sentiment.

Client-Specific Challenges:

A decline in business from key clients, such as Deutsche Bank, and a reduction in clients contributing over $50 million (down by 9 in the past four quarters) have added to revenue pressures.

Technical Reasons

Bearish Technical Signals:

TCS stock has broken below a rising trendline on the weekly chart with strong selling volumes, indicating intensified downward pressure.

The stock is trading below key moving averages, including the 20-day and 50-day EMAs, signaling a bearish short-term trend. Technical analysis suggests a continued downtrend unless the stock breaks above ₹3,049.6.

The Relative Strength Index (RSI) indicates selling momentum, though some analysts note the stock is approaching oversold conditions near the ₹2,950–₹3,000 support zone, which coincides with the 100-month EMA, a historically strong support level.

Significant Price Correction:

TCS shares have fallen 33% from their lifetime high of ₹4,592.25 (August 30, 2024) and 25% in 2025 alone, reflecting a sharp correction.

The stock is nearing support levels last seen in October 2022 (₹2,950–₹3,000), but a break below ₹2,900 could signal further declines.

📊 Price Action

• Current Price: ₹3,018.40

• Day's High: ₹3,025.00

• Day's Low: ₹3,011.10

• 52-Week High: ₹4,520.19

• 52-Week Low: ₹2,991.60

 Trend Indicators

• RSI (14): 30.5 → Downtrend zone

• STOCH RSI (14): 0.89 → Strong uptrend signal

• CCI (14): –73.82 → Bearish bias

• MFI: 24.04 → Strong downtrend

TCS is hovering near its 52-week low, with RSI and MFI suggesting weakness. 

However, STOCH RSI hints at a potential bounce. Watch the ₹3,005–₹3,021 zone for support confirmation. 

A break below ₹2,986 could trigger further downside. 

Resistance near ₹3,055–₹3,075 may cap any short-term recovery.

Other Reasons

Negative Market Sentiment:

The IT sector as a whole faced a weak start to FY25, with stocks like Infosys (-2.6%) and HCL Tech (-3.6%) also declining, reflecting broader sector challenges.

Investor concerns about TCS’s exposure to regional US banks (e.g., post-SVB collapse) and potential provisions have added to selling pressure.

Sector-Wide Challenges:

The IT industry is grappling with a slowdown in global tech spending, high attrition rates, and a shortage of digital talent, which have put pressure on margins across companies, including TCS.

The sector added only 3,847 jobs in Q1 FY26, indicating a broader trend of workforce reduction and automation focus.

Market Expectations and Valuation:

Despite strong fundamentals (net profit of ₹12,760 crore, up 6% YoY, and a robust order book of $8.3 billion), TCS’s Q1 FY26 results missed revenue expectations, leading to a series of analyst downgrades.

The stock’s trailing P/E ratio of 22x is below its five-year average of 24–26x, suggesting it may be undervalued, but market sentiment remains cautious due to short-term headwinds.

Management and Strategic Concerns:

While TCS has a strong deal pipeline in AI and cloud services ($1.5 billion), the market is concerned about its ability to capitalize on these opportunities amidst a global slowdown.

Positive Factors and Outlook

Despite the challenges, several factors suggest potential recovery:

Strong Fundamentals: TCS reported a 6% YoY net profit growth in Q1 FY26 and maintains industry-leading margins (24.5%). 

Its return on equity (ROE) and return on capital employed (ROCE) are robust at 52% and 64%, respectively.

Order Book Strength: 

TCS secured $8.3 billion in new deals in Q1 FY26, with growth in BFSI and Americas, indicating a healthy pipeline.

Analyst Optimism: 

Analysts remain bullish, with a median target price of ₹3,745.13 (range: ₹2,702–₹4,610), suggesting potential upside of 23.6% from the current price of ₹3,010.90 (as of August 1, 2025).

Dividend Support: 

TCS declared an interim dividend of ₹11 per share, with a dividend yield of 4.53%, providing some cushion to investors.

ConclusionThe fall in TCS’s share price in 2025 is driven by a mix of fundamental challenges (revenue decline, client spending delays, layoffs, and tariff concerns), technical bearish signals (breaking key support levels), and broader market sentiment impacted by sector-wide issues and negative news. 

However, TCS’s strong fundamentals, robust order book, and analyst optimism suggest that the current decline may be a short-term correction, with potential for recovery if macroeconomic conditions stabilize and new deals materialize. 

Investors should monitor support levels around ₹2,950–₹3,000 for potential buying opportunities, as suggested by technical analysts, while keeping an eye on global IT spending trends and US tariff developments.

Disclaimer: 

This content is for educational and informational purposes only. 

It does not constitute financial, investment, or professional advice. 

Readers should consult a SEBI-registered financial advisor before making investment decisions. 

The author is not liable for any losses or decisions based on this information.