Infosys, HCLTech shares fall 2% as CLSA says 'trim your positions', expects soft Q3 earnings for IT sector

Infosys, HCLTech, Wipro shares fall 2% as CLSA says ‘trim your positions’, expects soft Q3 earnings for IT

• Indian IT stocks dropped after CLSA's cautious note before Q3 FY26 earnings.
• CLSA downgraded HCLTech and Tech Mahindra, citing limited near-term upside
• Infosys, HCLTech, and Wipro shares dropped over 2 percent each

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The shares of Indian IT companies dropped in trade on January 5 after CLSA issued a cautious note, advising investors to reduce their positions as the upcoming Q3 FY26 earnings are expected to be soft.

The sharp rise in the share prices pushed the Nifty IT index down more than 1.6 percent to 37,698.95, as seen at 11 am on Monday.

Here's what CLSA said:

CLSA in its latest note said that the Nifty IT index has recently outperformed the broader Nifty index, pushing the valuations closer to fair levels and limiting near-term upside, CNBC-TV18 reported.

The international brokerage has downgraded HCLTech shares to 'Hold' from ‘Outperform’, and cut its rating for Tech Mahindra to 'Outperform' from 'High Conviction Outperform'.

CLSA has also removed Tech Mahindra from its ‘Focus List’, noting down concerns over the firm’s revenue growth recovery over the past 18 months not being at par with its own estimates or Street expectations.

It added that HCL Technologies is currently trading at around a 5 percent valuation premium, in comparison with peers like TCS and Infosys.

CLSA continues to favour Persistent Systems and Coforge among mid-cap IT stocks, while Infosys and Tech Mahindra remain its preferred picks in the large-cap space.

IT stocks today:

Infosys, HCLTech and Wipro shares fell more than 2 percent each, while Persistent Systems shares were down around 2 percent. Tech Mahindra and Tata Consultancy Services (TCS) shares fell more than 1 percent each, while Mphasis and Coforge shares were trading in the red with marginal losses.

LTIMindtree shares bucked the trend to trade in the green with marginal gains.