Nifty IT index sinks 4%; HCLTech, Persistent Systems, Coforge dip up to 11%

IT stocks came under sharp selling pressure today after HCLTech's Q4 results and weak growth guidance.

A muted quarterly performance and underwhelming 2026-27 (FY27) guidance from HCLTech, the third-largest information technology (IT) company by market capitalisation, triggered a selloff in IT stocks. HCLTech led the losers, falling 10.8 per cent, followed by Persistent Systems and Coforge, which declined 4.8 per cent and 4.4 per cent, respectively. The Nifty IT index was the worst-performing sectoral index, slipping nearly 4 per cent to close at 30,396.25, down 1,232.85 points. In comparison, the Nifty 50 fell 0.8 per cent. 

Of the 10 constituents of the index, nine closed in the red, with Infosys, Tech Mahindra, Tata Consultancy Services, rebadged LTM (earlier LTIMindtree), and Mphasis declining 2-4 per cent. Oracle Financial Services Software, however, bucked the trend, rising 2.5 per cent to close at ₹8,126.5 on the National Stock Exchange. 

 

Shashwat Singh, fundamental analyst at Bajaj Broking, said IT stocks came under pressure after HCLTech reported 2025-26 (FY26) fourth-quarter (January–March/Q4) results that missed market expectations and issued a muted growth outlook for FY27. 

The weaker demand commentary and limited near-term visibility have raised concerns about the sector’s earnings trajectory, triggering a sharp decline. Investor focus has now shifted to Infosys’ results, scheduled for April 23. “The market will closely track management commentary to gauge the broader demand environment and assess potential headwinds for the IT services sector,” Singh said. 

HCLTech on Tuesday reported a 4.2 per cent year-on-year (Y-o-Y) rise in consolidated net profit to ₹4,488 crore in Q4FY26, compared with ₹4,307 crore in Q4 of 2024-25. Revenue from operations rose 12.34 per cent to ₹33,981 crore from ₹30,246 crore a year earlier. 

The company flagged a highly volatile demand environment, citing tariff-related uncertainty and softer discretionary spending. It guided for FY27 revenue growth of 1–4 per cent in constant currency (CC) terms. 

The wide guidance band reflects market volatility, reduced discretionary spending, and two client-specific situations expected to lead to ramp-downs. 

HCLTech Chief Executive Officer and Managing Director C Vijayakumar described the environment as uncertain. “During the quarter, our performance fell below expectations due to softness in parts of the business, lower discretionary spending, and delayed decision-making,” he said. 

Analysts at JM Financial said HCLTech’s revenue and margins were below expectations. The softer-than-expected guidance and an artificial intelligence (AI)-led deflation impact of 3–5 per cent, as indicated by management, have raised concerns about overall industry growth for FY27. 

They added that performance was affected by discretionary cuts from two large US telecommunications (telecom) clients and discontinuation of SAP programmes. Client ramp-downs in manufacturing and retail are expected to create a 50 basis points (bps) headwind to FY27 growth. 

The brokerage has lowered its target multiple to 18x (from 19x earlier) and cut FY27 through 2027-28 (FY28) estimates by 1–2 per cent due to weaker growth visibility. It has downgraded HCLTech to ‘reduce’ and trimmed the target price to ₹1,350 from ₹1,440 earlier. 

ICICI Securities said weak guidance was driven by discretionary cuts at two telecom clients, budget cuts in one manufacturing and one retail client, AI-led deflation, a weak exit run rate, and a challenging macro environment. It added that risks from AI-driven deflation persist and has cut earnings per share estimates by 4 per cent/3 per cent, partly offset by a higher dollar-rupee assumption. The brokerage maintained a ‘hold’ rating and lowered the target price to ₹1,370 from ₹1,390. 

Shares of Persistent also came under pressure after soft Q4 numbers. ICICI Securities observed that while revenue came in slightly below expectations, growth still outpaced peers. 

Operating margin was below estimates at 16.3 per cent, down 40 bps quarter-on-quarter (Q-o-Q), due to an 80 bps contraction in gross margin. 

Despite high exposure to product engineering — a segment vulnerable to AI disruption — Persistent is pivoting to capture AI-led opportunities, the brokerage said. Growth momentum is expected to continue into FY27, supported by 21.6% Y-o-Y CC growth in deal annual contract value (ACV) in FY26 and management’s confidence in achieving a $2 billion annualised revenue run rate by end-FY27. 

However, ICICI Securities has downgraded the stock to ‘reduce’ from ‘hold’, citing premium valuations amid macro headwinds and AI-driven deflation risks. It marginally raised the target price to ₹4,900 from ₹4,860. 

Nomura said Persistent missed expectations on several parameters. Q4 revenue stood at $436 million, up 3.4 per cent Q-o-Q in CC terms, versus expectations of 4 per cent. Margin also fell short at 16.3 per cent, missing estimates by 40 bps. 

The brokerage has cut FY27–FY28 earnings estimates by 2–4 per cent and retained a ‘neutral’ stance, citing rich valuations. It lowered the target price to ₹5,200 from ₹5,300. 

 

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