Rs 92,000 crore ripple effect! HCL Tech’s weak Q4 drags IT pack; Infosys, Tech Mahindra slump up to 6%

Shares of IT heavyweights such as Tata Consultancy Services, Wipro, Infosys and Tech Mahindra came under sharp selling pressure on Wednesday, tumbling as much as 11% after HCLTech disappointed with its Q4 performance and issued a subdued outlook for the coming quarters.

The weak guidance triggered a wave of downgrades and target price cuts, dragging the entire IT pack lower and wiping out a staggering Rs 92,000 crore in market capitalisation from the Nifty IT in a single session. HCLTech led the decline, plunging 11%, followed by Tech Mahindra, Coforge, Persistent Systems and Infosys, which dropped up to 6%. Meanwhile, Tata Consultancy Services and Wipro were relatively resilient but still ended up to 2% lower.

While releasing its Q4 results on Tuesday, HCLTech guided for FY27 revenue growth of 1% to 4% year-on-year in constant currency terms. The company also fell short of its FY26 guidance of 4.0% to 4.5% growth, reporting 3.9%. Its outlook for services growth at 1.5% to 4.5% is notably lower than the 4.8% year-on-year constant currency growth recorded by the segment in FY26.

Wall Street major Jefferies was the biggest critic, downgrading the stock to Underperform with a price target of Rs 1,165, one of the lowest on the Street.

"We expect HCLT's organic revenue growth in FY27 to be 2.4%, the lowest since FY23," the brokerage said, cutting its target price-to-earnings multiple from 18x to 16x. "Weaker growth expectations will lead to PE derating especially when HCLT is trading at a 16% premium to TCS, despite similar growth outlook." Jefferies cut its FY27–28 EPS estimates by 1–2% and now expects an 8% recurring EPS CAGR over FY26–29.

JPMorgan has maintained a ‘Neutral’ rating on HCLTech and lowered its target price to Rs 1,370 from Rs 1,419, while HSBC has retained a ‘Hold’ rating on HCLTech shares and cut its target price to Rs 1,480 from Rs 1,560.

The brokerage said the company’s Q4FY26 performance was a sharp miss, which has also led to weaker-than-expected growth guidance for FY27. The miss was primarily due to unexpected budget cuts at key US telecom clients and the cancellation of a few SAP projects. HSBC added that earnings growth and stock returns are unlikely to compound at double-digit rates in the near term.

Citi maintained Neutral but cut its target price to Rs 1,385, calling it "a weak 4Q as revenues, deal TCV, growth outlook were all below expectations." The brokerage flagged deteriorating forward indicators: TTM deal TCV up just 1% YoY, headcount growth of 1.7% YoY, and management's commentary on reduced discretionary spend in telecom and the discontinuation of two SAP programmes. Citi trimmed FY27–28 EPS estimates by 1–2%, warning that "weak guidance will weigh on stock in near term."

On the contrary, CLSA retained its outperform rating with a target of Rs 1,519, though it acknowledged the quarter was "disappointing" across revenue, EBIT margins, order book, and FY27 guidance, and flagged "limited visibility regarding offsetting the potential AI deflation to revenues through incremental volumes."

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