TCS stake sale can increase index weightage due to higher free float: Elara

Tata Sons, the holding company of the Tata Group is selling a small stake in its crown jewel Tata Consultancy Services (TCS). This will help Tata Sons raise around Rs 8,000 crore, which it can then use to invest in other group companies. In an interview with CNBC-TV18, Ravi Menon, Analyst-IT Services at Elara shared his views and outlook on the same.

Typically large block deals always had a discount. The increase in free float will increase its Nifty weightage and that will be a minor positive driving more demand for the stock, he said.

From a long-term perspective, I would still regard TCS in a top pick but recent price upmove has been a little too sharp. So for the near-term, I would look at HCL Technologies or Wipro for better returns, he added.

Over the next 12 months, our price target for TCS is Rs 3,050, said Menon.