Shares of major Indian IT companies, including Tata Consultancy Services, Infosys, and Tech Mahindra, faced significant selling on Wednesday, with declines reaching up to 11%. This followed HCLTech’s underwhelming fourth-quarter earnings and a cautious forecast for upcoming periods. The pessimistic outlook prompted multiple analyst downgrades and reductions in price targets, pulling down the broader IT industry and erasing approximately Rs 92,000 crore in market value from the Nifty IT index in one trading day. HCLTech experienced the steepest drop at 11%, while Tech Mahindra, Coforge, Persistent Systems, and Infosys saw reductions of up to 6%. Tata Consultancy Services and Wipro showed more stability but still closed down by up to 2%. In its fourth-quarter announcement on Tuesday, HCLTech projected fiscal year 2027 revenue growth of 1% to 4% in constant currency. The firm also missed its fiscal year 2026 target of 4.0% to 4.5% growth, achieving only 3.9%. Its services segment outlook of 1.5% to 4.5% growth falls below the 4.8% year-over-year constant currency expansion seen in fiscal year 2026. Investment firm Jefferies issued a strong critique, downgrading the stock to underperform with a target price of Rs 1,165, among the lowest available. The brokerage anticipates HCLTech’s organic revenue growth for fiscal year 2027 at 2.4%, the lowest since fiscal year 2023, and reduced its price-to-earnings multiple from 18x to 16x. It noted that lower growth prospects could lead to valuation adjustments, especially since HCLTech trades at a 16% premium to TCS despite comparable outlooks. Jefferies also lowered its fiscal year 2027-2028 earnings per share estimates by 1-2% and projects an 8% compound annual growth rate for recurring earnings per share from fiscal year 2026 to 2029. JPMorgan kept a neutral rating on HCLTech and adjusted its target price to Rs 1,370 from Rs 1,419. HSBC maintained a hold rating and reduced its target to Rs 1,480 from Rs 1,560. The firm described the fourth-quarter fiscal year 2026 results as a significant shortfall, contributing to a softer growth projection for fiscal year 2027. The underperformance stemmed mainly from sudden budget reductions by major U.S. telecommunications clients and the termination of several SAP initiatives. HSBC indicated that profit growth and share performance are not expected to achieve double-digit increases soon. Citi retained a neutral stance but lowered its target price to Rs 1,385, labeling the quarter as weak due to revenues, deal total contract values, and growth forecasts all falling short of expectations. The brokerage highlighted concerning trends: trailing twelve-month deal total contract value up only 1% year-over-year, headcount increase of 1.7% year-over-year, and comments from management on decreased discretionary spending in telecommunications plus the halt of two SAP programs. Citi reduced its fiscal year 2027-2028 earnings per share forecasts by 1-2% and cautioned that the subdued guidance could pressure the stock in the short term. In contrast, CLSA upheld an outperform rating with a target of Rs 1,519, while recognizing disappointments in revenue, operating margins, order bookings, and fiscal year 2027 guidance. It pointed out limited insight into countering potential revenue impacts from AI through additional volumes. Recommendations, suggestions, views, and opinions from experts are their own and do not reflect those of The Economic Times.
