HCL Tech, Infosys to TCS: IT stocks crash up to 10% today — What's behind the massive selloff?
Shares of IT stocks fell like ninepins in the early morning trade on Wednesday, 22 April, after leading tech firm HCL Technologies’ March-quarter results (Q4) and poor management commentary sparked a fresh sell-off in the sector.
IT stocks, already grappling with weak performance due to weak demand concerns and an AI-led scare, crashed up to 10%, dragging the Nifty IT index 3.35% lower to 30,665.35. All index constituents were in the red.
HCL Tech shares emerged as the worst loser with a massive 9.7% decline and were headed for their worst session in eleven years. Other index heavyweights like Infosys, TCS and Tech Mahindra also lost 2-3%.
Why are IT stocks falling?
HCL Tech’s FY27 earnings forecast and Q4 results missed analysts’ expectations. The company’s CEO, C Vijayakumar, said that the weakness in the March quarter performance stemmed from weak discretionary demand.
The revenue fell 3.3% QoQ in CC terms to $3,682 million, missing Streets’ estimate of -1.6% CC growth. EBIT margins fell 200bps sequentially to 16.5%, and also missed Street estimates of 17.5%. TCV, too, was weak at $1.9 billion, down almost 35% YoY.
FY27 services revenue growth guidance of 1.5-4.5% was also below expectations, and now converges its growth differential vs TCS and Infosys, which is likely to lead to convergence of their valuations.
According to a Goldman Sachs report, cited by Reuters, the weak performance and cautious outlook signal sector‑wide challenges with discretionary spending rather than an HCL‑specific problem. The brokerage added that slower project ramp‑ups and macro pressures suggest any demand recovery will remain elusive.
Earlier this month, larger rival TCS had logged its first-ever annual revenue decline in dollar terms, whereas Wipro had missed earnings estimates, flagging geopolitical and policy disruptions as well as client-specific issues.
The IT sector has grappled with uncertainties over the last one year due to US tariffs, H1-B visa fee hike, along with the geopolitical turmoil and a likely impact of AI on the services sector.
Should investors steer clear of IT stocks?
Ajit Mishra of Religare Broking told Mint that, in the near term, the IT sector outlook remains weak. Until we see AI’s contribution to overall revenue—and how it plays out over the coming quarters—we’ll not have a clearer picture of how services are evolving, without impacting overall revenue flows, he said.
He advised steering clear of the sector in the near-to-medium term because we have other sectors that are doing exceptionally well. “There’s no point sticking to IT, especially if your view is medium to long term. Beyond that, we may continue to hear triggers that could cause periodic rebounds. But from a sectoral perspective, the overall change in the business model and how it will emerge from this phase will definitely take time,” he added.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.