Should You Worry? Citi Cuts TCS Share Price Target to Rs 3,135 After Layoff Shock — Should You Buy, Sell or Hold?

Tata Consultancy Services (TCS), India’s largest IT services firm, triggered market jitters after announcing plans to lay off 12,000 employees—about 2% of its global workforce—over FY26.

The development, confirmed by TCS CEO and MD K. Krithivasan over the weekend, comes amid broader headwinds facing the Indian IT sector, including demand slowdown and rising margin pressures.

TCS Share Price Target
Following the announcement, Citi maintained its “Sell” rating on TCS and lowered its target price to Rs 3,135, marginally below the current market price of Rs 3,140. The brokerage flagged “skill mismatches,” sluggish performance in core markets, and productivity concerns as key reasons behind its cautious stance.

There could be multiple reasons behind this move, including pressure on margins, demand, skill mismatch and productivity asks, Citi noted in its latest report.

Layoffs Spark Investor Concerns
Krithivasan clarified that the layoffs are not linked to AI-led automation.
“This is not because of AI delivering 20% productivity gains. We are not doing this due to automation,” he told the media.

“This is more about where there is a feasibility of deployment. We will continue to acquire, train, and invest in talent.”

The job cuts will primarily impact mid- and senior-level employees as the company restructures to become a “future-ready organisation.” Affected employees will receive severance packages, extended insurance coverage, and career transition support, according to media reports.

Market Reaction: Nifty IT Sinks
The announcement sent IT stocks lower on Monday. The Nifty IT index fell by 1%, with TCS, Infosys, Wipro, HCL Tech, and Tech Mahindra leading the decline. TCS’s workforce stood at 613,069 employees globally at the end of the June 2025 quarter.

Read More – Stock Market: Will Nifty Hold 24,800 Or Break Further?

The layoffs come amid a broader industry-wide correction. TCS’s headcount has declined by 2,249 employees, while Infosys and Wipro have cut over 12,000 and 25,000 jobs, respectively, over the past two years. The slowdown has also caused onboarding delays for over 600 lateral hires and introduced stricter internal policies, including a new bench cap of 35 non-project days annually.

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