Morgan Stanley reiterates ‘Overweight’ rating on TCS, sees 10% upside potential

Tata Consultancy Services has been drawing renewed attention after Morgan Stanley reiterated its “Overweight” rating, maintaining an “In-line” industry view and setting a price target of Rs 2,880, implying about 10% upside from current levels.

TCS shares were trading nearly 2% lower at Rs 2,569 during Wednesday’s session, reflecting short-term market pressure even as longer-term sentiment improves.

Morgan Stanley’s thesis hinges on a potential recovery in revenue growth and valuation re-rating, suggesting that recent underperformance may be nearing an inflection point. The brokerage sees improving fundamentals positioning TCS to outperform peers as growth stabilizes.

The brokerage expects the stock to outperform the broader market index over the next 60 days.

It also forecasts around 4% revenue growth in FY27, which would be comparable to or better than many large-cap peers. After lagging in FY26, TCS’s weaker growth is already reflected in its valuation, with its P/E multiple trading at a notable discount to peers. Morgan Stanley anticipates this gap will begin to close, particularly as early large-cap earnings suggest TCS may be better positioned on FY27 growth expectations.

Currently, TCS trades at about a 19% discount to peers such as HCLTech, a gap the brokerage expects to narrow in the coming quarters.

Overall, the firm assigns a probability of over 80% to this scenario, indicating a high level of confidence, though it notes that such estimates are subjective and based on its internal assessment.

On the technical side, data from Trendlyne shows the 14-day RSI for Tata Consultancy Services at 58.4. Typically, an RSI below 30 signals an oversold condition, while a reading above 70 indicates the stock may be overbought.

In terms of moving averages, the trend appears slightly bearish, with TCS trading below five of its eight simple moving averages (SMAs). The stock is currently holding above only its 10-day, 20-day, and 30-day SMAs.

Looking at the shareholding pattern for the March 2026 quarter, foreign institutional investors (FIIs) have trimmed their stake from 10.37% to 9.66%. In contrast, mutual funds have raised their holdings from 5.52% to 5.77%. Promoter ownership remains steady at 71.77% during the same period.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)