Despite immediate challenges, HCL Tech a good bet for long-term investors

However, once the macro situation improves and the IBM deal delivers on growth and margins, HCL Tech could be a good bet

HCL Technologies has lagged its peers on concerns over organic growth and near-term profitability. The stock has shed about 4 per cent in the last three months, compared to a 0.5 per cent gain for the Nifty IT index. 

Valuations, too, are at a 22-45 per cent discount to IT peers, and this is unlikely to improve soon. 

Investments made for new deal wins and additional fixed costs for its recently concluded IBM deal will weigh on near-term profitability and earnings. The management, too, had cut its FY20 margin guidance by 100 bps to the 18.5-19.5 per cent range (lower