HCL Tech shares fell 1.5% to ₹1,211 in Thursday morning trade, making it the top loser on both the Nifty 50 and Nifty IT indices. The stock has declined around 26% so far in 2026, significantly outperforming the Nifty 50's 10.3% decline. At the prevailing price, HCL Technologies had a market capitalisation of just under ₹3.29 lakh crore with an adjusted P/E multiple of 18.4x, according to NSE data. The weakness came amid a largely flat broader market, with the Sensex down around 20 points at 74,744.68 and the Nifty 50 nearly unchanged at 23,427.30.
Citi maintained its 'sell' rating on HCL Tech with a target price of ₹1,110 per share, implying downside of around 10% from Wednesday's closing price. The brokerage acknowledged progress in artificial intelligence and opportunities in the data-centre business, but cited the company's valuation premium to large-cap IT peers as a key concern. While advanced AI represents a new total addressable market and HCL Tech is making good progress in the segment, Citi remains cautious because the valuation premium persists. The demand environment for HCL Tech remained largely unchanged, with the business seeing usual seasonal trends.
Within engineering services, the automotive and telecom verticals have been under pressure, although Citi expects the business to stabilise. The software segment has been affected by macroeconomic weakness, portfolio declines and a shift towards term licences. According to Citi's meeting with HCLTech CEO C Vijayakumar and CFO Ajay Mohan, the company highlighted new opportunities from AI and advanced AI-led services, while discussing investments in data centres and engineering capabilities. The software business had been sluggish over the past four quarters, with software revenue projected to grow at a 3%-4% annual rate and EPS CAGR at about 5% through FY29.
Separately, HCL Tech announced the launch of an Advanced Semiconductor Lab in Bengaluru on September 8 with an investment of ₹185 crore, expanding its capabilities in semiconductor testing and engineering. The 40,000-square-foot facility includes 25,000 square feet of Class 10K and Class 1K cleanrooms and will provide end-to-end post-silicon engineering, advanced testing and failure-analysis services. The company said the facility will support research and development, pre-production and production qualification, with the aim of enabling faster turnaround, improving quality and reducing complexity for global customers. Citi was more constructive on HCL Tech's data-centre opportunity, saying the company could capture a larger share of value as a full-stack player.
According to Citi, the brokerage expects HCLTech to deliver about 5% earnings per share growth through FY29, which limits the scope for stronger earnings growth despite the company's focus on AI, data centres and other new areas. The company plans to invest about ₹35 billion to set up a new data centre facility in India, marking a strategic shift as data centres have traditionally been a business HCLTech has not focused on due to commoditisation and asset-intensity concerns. The new facility is expected to serve large domestic customers as well as global clients, with US start-ups potentially outsourcing AI model training work to HCLTech.
