Buy the Dip? Analysts Stay Bullish on Infosys & HCL Tech Despite Brutal Selloff
Both IT giants have slid to 52-week lows after disappointing guidance, yet leading brokerages are doubling down with buy calls and upside targets of 17–38%. Here is what the data actually says.
The Indian IT sector has had a brutal start to 2026. Infosys and HCL Technologies — two of the country’s most closely watched technology bellwethers — have each shed around 25 percent of their value since January, slipping to 52-week lows in the aftermath of their Q4 FY26 results. Yet in a striking display of conviction, several major brokerages are standing firm on buy ratings, arguing that the selloff has created a rare opportunity for patient, long-term investors. The case deserves careful examination.
The immediate trigger was guidance. Infosys shocked markets on April 23 by projecting FY27 constant-currency revenue growth of just 1.5 to negative 3.5 percent — a wide and unusually cautious range that spooked investors who had hoped for a recovery trajectory. HCL Tech’s numbers were similarly sobering: Q4 FY26 revenue fell 3.3 percent quarter-on-quarter to $3.68 billion, missing consensus estimates, while net new deal wins of $1.9 billion represented a 35 percent year-on-year decline. Both stocks fell sharply on the news.
“Despite the near-term pain, these are fundamentally sound businesses trading at historically cheap valuations. The question is whether the bad news is already priced in.”
Market Analyst, Share.MarketWhat the Numbers Actually Show
Strip away the guidance anxiety and the underlying Q4 earnings picture is not entirely bleak. Infosys posted a 20.9 percent year-on-year jump in net profit to ₹8,501 crore, while revenue climbed 13.4 percent year-on-year to ₹46,402 crore. These are not the numbers of a company in distress — they reflect a business executing steadily on its existing deal book, even as new demand signals have turned uncertain.
The Brokerage Thesis: Buy the Weakness
Despite the dismal near-term backdrop, a cluster of well-regarded brokerages has maintained or freshly initiated buy ratings on both stocks. Their collective argument rests on three pillars: depressed valuations relative to long-term averages, structural positioning in AI and cloud, and dividend support that makes holding through uncertainty less painful.
Motilal Oswal has been particularly vocal, reiterating a buy on Infosys with a target price of ₹1,450 — implying approximately 25 percent upside from current levels. The brokerage acknowledges that deal economics are under pressure and that AI-led deflation in software engineering services is a genuine headwind, but argues that Infosys’s partnership with Anthropic and its asset-light delivery model position it well for the next wave of enterprise AI spending.
Nirmal Bang’s institutional equities desk has gone further, framing its bullish stance in the context of a broader “two-sided AI risk” thesis. The brokerage argues that whether AI adoption accelerates or stumbles, both scenarios create demand for large IT services firms — either to implement AI-powered transformation programs, or to shore up legacy systems when AI disappointment forces enterprises back to basics. In this framing, Infosys and HCL Tech are not disruption victims but potential disruption beneficiaries, provided they execute on their own AI capabilities.
The Bear Case: Why Caution Is Not Irrational
The bulls are not without credible opposition. Ventura Securities’ Head of Research Vinit Bolinjkar has articulated a more cautious view, noting that both Infosys and HCL Tech face near-term headwinds in Europe and in the telecom vertical that are unlikely to resolve quickly. For HCL Tech specifically, the weak Q4 numbers — revenue miss, deal win decline, margin shortfall — suggest execution challenges that go beyond macro uncertainty. Bolinjkar flags HCL Tech as a “cautious sell” for now, advising a “wait-and-watch” posture for Infosys.
The technical picture adds to the concern. Both stocks have broken below their March 2026 lows and are trading beneath the lower end of their Bollinger Bands — a configuration that suggests downward momentum has not yet exhausted itself. Geojit Investments’ chief market strategist identifies ₹1,220 as the critical support level for Infosys; a sustained hold above that level is needed to arrest further deterioration. For HCL Tech, key support lies in the ₹1,175–₹1,195 zone.
- FY27 guidance range for Infosys is unusually wide — from negative 3.5% to positive 1.5% — signalling high uncertainty, not conservative prudence
- HCL Tech’s Q4 deal wins fell 35% year-on-year; a sustained recovery in the pipeline must be demonstrated, not assumed
- AI-led deflation in software engineering services could compress billing rates across the sector faster than currently modelled
- Weakness in Europe and telecom verticals may persist through H1 FY27 before any meaningful recovery
- Both stocks are in technical downtrends and have broken below March 2026 lows; downside momentum is still elevated
- Broader Nifty IT index is down roughly 25% year-to-date — sector-level sentiment may require a catalyst to reverse
The Valuation Argument
Perhaps the strongest element of the bull case is valuation. HDFC Securities notes that the Nifty IT Index currently trades at roughly 17.8 times one-year forward earnings — approximately 16 percent below its 10-year historical average. For investors with a two- to three-year horizon, entry at these levels has historically generated meaningful outperformance relative to the broader market. The sector is expected to deliver a 5.9 percent dollar revenue compound annual growth rate and a 10.8 percent earnings-per-share CAGR through FY28, according to HDFC’s projections.
The dividend angle also deserves attention. Infosys has declared a final dividend of ₹25 per share for FY26 and offers a trailing yield of 3.72 percent at current prices — a meaningful carry for investors willing to sit through a difficult period. HCL Tech, which recently announced an interim dividend with a record date of April 25, offers an even higher trailing yield of 4.49 percent, supported by a payout ratio of over 90 percent. Both companies are debt-light, giving them balance sheet flexibility that smaller peers lack.
The Structural Picture: AI as Double-Edged Sword
Lurking behind every conversation about Indian IT right now is the question of artificial intelligence — specifically, whether generative AI is a tailwind that will expand the addressable market for services, or a headwind that will automate away the billable hours that are the sector’s lifeblood. The honest answer at this stage is: both, and the balance is shifting faster than most participants anticipated even twelve months ago.
For Infosys, the Anthropic partnership is a genuine differentiator — it gives the company early access to frontier AI capabilities and credibility with enterprise clients navigating their own AI strategies. Motilal Oswal’s analysis describes Infosys as well-positioned to benefit from enterprise demand for AI implementation, even as it concedes that AI-induced effort deflation is compressing margins on legacy service lines. The firm that best threads this needle — using AI internally to reduce costs while selling AI-enabled services externally to grow revenue — will emerge from this period significantly stronger.
HCL Tech’s pitch rests on its R&D and engineering services heritage, which positions it differently from pure-play IT services peers. Its data center and engineering-led offerings may prove more durable in an AI-intensive environment than traditional application management and testing work, where automation pressure is most acute.
“The Nifty IT Index trades at a 16% discount to its 10-year average. History suggests that patient entry at these levels has rewarded investors. The sector has recovered from prior troughs — the question is only one of timing.”
HDFC Securities ResearchThe Verdict: Opportunity With Eyes Open
The brokerage community’s buy ratings on Infosys and HCL Tech are not the product of wishful thinking — they reflect a coherent thesis grounded in valuation, dividend support, structural AI positioning, and historical recovery patterns. The Nifty IT sector has been through cyclical downturns before, and investors who bought during prior troughs have typically been well rewarded on a two-to-three year view.
That said, the bears are not wrong to flag near-term risks. The guidance offered by both companies is genuinely cautious, deal momentum needs to recover, and the technical picture remains weak. The prudent approach for most investors is not to buy all at once but to build positions gradually — deploying capital in tranches as the stocks either find technical support or deliver improving quarterly data.
For long-term investors with a 24-to-36-month horizon and a stomach for continued short-term volatility, the case for Infosys and HCL Tech is arguably as compelling as it has been in years. The question is not whether these companies will survive the AI transition — they will. The question is whether the current prices sufficiently compensate for the uncertainty of timing. On the evidence of where valuations stand relative to history, the answer from a growing number of analysts is: yes.
Disclaimer: This blog post is for informational and educational purposes only and should not be construed as investment advice. Stock market investments are subject to market risk. All analyst targets and ratings cited are sourced from publicly available brokerage reports as of April 2026. Readers are strongly advised to consult a SEBI-registered investment advisor before making any financial decisions. Past performance of a sector or stock is not a guarantee of future returns.
