HCL Tech falls over 8% after muted outlook

Mumbai: HCL Technologies slumped over 8% and dragged other information technology (IT) stocks lower on Tuesday due to lower-than-expected revenue guidance after its third-quarter results.

The Nifty IT Index shed 2.13% on Tuesday. Out of the 10 stocks in the IT Index, 8 declined and 2 advanced. LTI Mindtree tumbled 4.36% while L&T Technology Services and Persistent Systems fell 2.8% and 1.6%, respectively.

"HCL Technologies has indicated a soft Q4 given the ramp down in a mega deal and the revenue guidance is primarily due to acquisition, so organic guidance remains same," said Bhupendra Tiwary, AVP Research, ICICI Securities. "While we didn't expect the street to cheer the results; the sharp reaction in the shares was a surprise."

Analysts said investors may be paring gains after the stock moved up in the previous quarter.

"HCL Technologies overall reported good results and missed the estimates by a whisker," said Vinit Bolinjkar, head of research, Ventura Securities. "The steep fall could be due to a big investor getting out of the company."

In the past seven months till Monday, HCL shares surged 53% as against the near 38% gains in Infosys and a 14% upmove in TCS.

BNP Paribas retained its outperform rating on HCL Tech and a price target of Rs 2,100 after its December quarter results, implying an upside of 15% from Tuesday's closing price of Rs 1,820.

The brokerage said valuations are reasonable as the stock is trading at a dividend yield similar to the last 10-year average.

Bolinjkar said that the price performance had already played out prior to the results. The positives are already factored in the prices, he said. "The valuations are reasonably rich in the IT pack after the outperformance in the last quarter and the moves are expected to be stock specific," said Bolinjkar. "If there is any negative news from the US, these stocks could take a knock."