The IT sector has experienced a significant correction with the Nifty IT index falling about 20% since the start of calendar year 2026 and around 34% from its December 2024 peak, even as operating performance has remained relatively stable. According to ICICI Direct, this correction reflects rising concerns around Generative AI and its long-term effect on IT services business models, with large-cap and midcap IT names correcting meaningfully as investors reassess near-term growth visibility. The sector has not collapsed operationally, with deal wins continuing and operating performance staying relatively stable, but the market has become more cautious about future growth prospects. Most quantitative parameters now look more attractive than historical averages, with PE at its lowest level since 2019 and dividend yield around 3.5%. The correction spans 16 months of consolidation, making it a meaningful valuation reset rather than a random market wobble.
Salesforce delivered exceptional results for fiscal year 2026, posting record revenues, record quarter, and record cash flows to close out the year. As reported by TheStreet, the CRM giant returned more than $14 billion to shareholders, which represents roughly 99% of its free cash flow. The company's premium product bundles saw a 300% quarter-over-quarter adoption in Q4, reflecting strong customer demand for expanded capabilities. Salesforce ended fiscal 2026 with what it calls a "Rule of 44" score, combining revenue growth and operating margins, and is targeting a "Rule of 50" over time. Looking ahead, the company expects to return to organic double-digit revenue growth, with acceleration coming in the second half of fiscal 2027. The company also completed its acquisition of Informatica in November, with the integration moving faster than expected and turning accretive in under 12 months.
Michael Burry, the investor who famously called the 2008 housing collapse, is making a deliberate argument that the sell-off in quality software stocks offers a clear buying opportunity. According to TheStreet, Burry does not believe the pressure on software stocks comes from companies performing poorly, but rather from technical problems as falling prices triggered additional stress on software-related debt. He has raised exposure in Salesforce and opened a roughly 3.5% position in PayPal, while maintaining holdings in Fiserv, Adobe, Autodesk, and Veeva Systems. Beyond these positions, Burry plans to add MSCI to his portfolio. This targeted group of companies occupies important roles in payments, design software, enterprise workflows, and data analytics. Burry argues that the market has been so focused on which companies will win the artificial intelligence race that it has overlooked which established companies are quietly building real AI businesses right now.
Market expert Neeraj Dewan is urging investors to exercise caution in the IT sector while building positions in energy, telecom, FMCG, and select consumer durables. According to reports from The Economic Times, Dewan's caution stems from HCL Tech's recent guidance for FY27, which has made him more cautious on the broader IT pack. While TCS had offered some reassurance after its results, suggesting AI-related pressures on margins were manageable, HCL Tech's commentary brought concerns back to the surface. Dewan told ET Now that "IT will not be so easy to make money by investing in IT," adding that despite sharp stock corrections making valuations look attractive, investors should wait for consolidation rather than rushing in. Infosys results are now the next key event, given the company's relatively stronger performance over recent quarters compared to peers.
Despite the correction, analyst sentiment on Salesforce remains positive, with 28 out of 37 analysts recommending "Buy", eight recommending "Hold," and one recommending "Sell." The average price target is $262, indicating 40% upside from current levels. If Salesforce stock is priced at 12 times forward free cash flow, which is below the 10-year average of 30x, it could return 63% within the next three years. If the FCF multiple expands to 15x, CRM stock could double in three years. The broader message from Dewan and Burry's strategies aligns: stay selective, avoid chasing beaten-down IT stocks prematurely, and focus on sectors where demand visibility and earnings momentum are more reliable in the near term.
