Shares of HCL Technologies slipped 1.66 per cent to Rs 1,046.15 per piece in Wednesday’s trade ahead of the firm’s March quarter earnings on Thursday.
HCL Tech shares fell 3.68 per cent in the last one week, while it rose 5.09 per cent in the last six months. On a year-to-date basis, the stock surged 0.67 per cent.
On the Nifty IT index, all stocks are in red. Coforge, LTI Mindtree, HCL Tech, and Infosys are among the top underperformers. Heavyweight TCS has also shed nearly a percent.
At the time of writing, the Nifty IT index traded at 26,867.40 down by 299.55 points or 1.10%. The index has touched an intraday low of 26,818.60.
What Should Investors Do?
HCL Technologies, which will report Q4 results on Thursday, saw FPIs increasing stake to 18.29 per cent from 17.17 per cent sequentially. Motilal Oswal said HCL Tech is one of the key beneficiaries of Cloud adoption at scale, given its expertise in IMS. That said, the IT firm’s Q4 results are expected to impacted by software business seasonality. HCL Tech is expected to report a 20.3 per cent YoY (1.8 per cent QoQ) rise in revenue at Rs 27,180 crore. Profit is seen rising 9.6 per cent YoY to Rs 3,940 crore. Sequential dollar revenue growth is seen at 1.5 per cent while CC revenue growth is seen at 0.5 per cent.
“HCL Technologies has fallen below the 200DMA level of Rs 1,030 and has come near the crucial support zone of Rs 1,010 level from where one can anticipate some pullback and improvement in bias,” said Vaishali Parekh, Vice President – Technical Research at Prabhudas Lilladher.
In case of trading, Parekh said, “One can buy and accumulate the stock near the mentioned support zone and expect an upward move till Rs 1,110 -1,120 levels, keeping a strict stop loss at Rs 1,000 level.”
What to Expect in Q4?
Brokerage IDBI Capital Markets expects flat revenue growth from Wipro in constant currency terms. An assessment done by the brokerage showed that softness in the consulting business, BFSI, tech and retail verticals is expected to result in overall muted growth. “We forecast EBIT margin to grow by 90 bps QoQ led by an uptick in utilization,” IDBI Capital Markets said. The brokerage sees 6.6 per cent QoQ and 5.4 per cent YoY growth in the net profit of Wipro in Q4. Revenue in dollar terms may grow 0.9 per cent and 3.7 per cent, respectively, during the quarter.
On the other hand, IDBI Capital Markets expects revenue growth for HCL Technologies (in CC) terms to decrease by 1 per cent QoQ with the cross-currency tailwind of 15 bps. This is mainly due to seasonal softness in product revenue.
“We expect EBIT margin to taper down by 99 bps QoQ mainly led by a decline in revenue growth,” the brokerage said.
Meanwhile, investors should zero in on the outlook for Q1FY24, the outlook for consulting business, commentary on the large deal wins, tech budgets, commentary on client mining and across verticals-especially BFSI, Consumer, Hi-Tech and manufacturing business units, attrition trends, M&A and capital allocation and outlook on any other macro challenges in the forthcoming financial results.
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