HCLTech's $4.5 billion wipeout sparks broad IT selloff, reviving doubts over sector recovery
Employees of HCLTech walk inside the office premises on the outskirts of Lucknow, India, March 20, 2024. REUTERS/Pawan Kumar
April 22, BENGALURU - HCLTech lost $4.5 billion in market capitalisation on Wednesday after it projected fiscal 2027 revenue growth below estimates, with restrained client spending raising fresh doubts over a recovery in India's $315 billion IT industry.
The weakness points to sector-wide challenges rather than a company-specific issue, Goldman Sachs analysts said, citing subdued discretionary spending, slower project ramp‑ups and ongoing macro pressures that suggest a meaningful demand recovery may remain elusive.
Top Indian IT companies have been beset by uncertainties over the last year from U.S. tariff and immigration policies as well as geopolitical turmoil in the Middle East, with clients choosing to focus on optimising costs.
HCLTech shares ended the session down 10.7 per cent at 1,286 rupees, losing the most in a day in more than 10 years. Its fourth‑quarter earnings also missed analyst estimates.
The gloom spilled across the IT pack, dragging larger peers Infosys and Tata Consultancy Services down 3.4 per cent and 3 per cent, respectively, and the sub-index down 3.9 per cent.
HCLTech's trading volumes surged as panic selling gripped investors, with 33.06 million shares changing hands—the busiest session since November 2012, and nearly 10 times the 30-day average. Meanwhile, at least six brokerages cut their price target, with Jefferies also downgrading the stock to "Underperform" from "Hold".
NSE data for HCLTech's May 26 expiry contracts showed a jump in put-buying at the 1,200‑rupee strike, with open interest swelling to 6,863 contracts by market close, and heavy call writing at 1,300.
The former implies investors are betting on the stock falling further by around 7 per cent while the latter suggests limited scope for a near‑term rebound.
"The business environment remains highly fluid, making it difficult to form a definitive view of how the next 12 months will unfold," said CEO C Vijayakumar in a post-earnings call.
He also called out specific project scaledowns from two clients in the Americas region, which could shave about 0.5 per cent off annual growth.
Tech Mahindra staged a partial comeback to close 2.5 per cent down, after sliding nearly 6 per cent, following a fourth-quarter revenue beat.
