Leading domestic brokerage MOFSL (Motilal Oswal Financial Services) has issued updated recommendations for several Indian IT firms following their Q4 earnings reports. Earlier this week, on April 22, 2026, MOFSL maintained 'Buy' ratings on HCL Technologies Ltd and Persistent Systems Ltd, while reiterating a 'Sell' call on Tata Elxsi Ltd.
The brokerage's target prices suggest a significant upside potential for HCL Tech and Persistent Systems, contrasting sharply with a projected downside for Tata Elxsi, reflecting varying outlooks on their performance and market conditions.
HCL Technologies Ltd: A Buy Despite Headwinds
MOFSL has maintained its 'Buy' rating for HCL Technologies, setting a target price of Rs 1,650, which implies a 15% upside potential. This recommendation comes despite the company's soft March quarter results and a conservative FY27 guidance of 1-4% year-on-year constant currency (CC) growth.
The brokerage noted that HCL Tech's guidance reflects client-specific disruptions experienced in March and sharp discretionary spending cuts from two major US clients in the telecom sector. Additionally, two other significant client-specific headwinds, one in retail and another in manufacturing, are expected to create a 50 basis point drag on services growth in FY27. Europe also remains weak due to geopolitical issues, while North America is stable apart from these specific client situations. Software weakness was attributed to deal deferrals, including impacts from a US government shutdown and the West Asia crisis.
Despite these challenges, MOFSL believes HCL Tech's strategic exposure to Engineering and R&D (ER&D), chip design, and infrastructure management makes it more resilient compared to its application-heavy peers, a thesis that has held true in previous downcycles.
Persistent Systems Ltd: Strong Growth Profile Maintained
Persistent Systems also received a 'Buy' rating from MOFSL, with a target price of Rs 6,200, indicating a 16% upside potential. The brokerage acknowledged that Q4 marked the fifth consecutive quarter of decelerating revenue growth for Persistent Systems, excluding software licenses. However, it remains one of the fastest-growing IT services companies within MOFSL's coverage.
The March quarter saw revenue growth of 3.4% quarter-on-quarter in constant currency terms, slightly missing consensus estimates. Revenue growth (excluding software licenses) softened to 15% year-on-year in Q4. MOFSL has moderately cut its earnings estimates by 4-5%, factoring in the soft Q4 exit and ongoing reinvestments in AI platforms and consulting capabilities. Nevertheless, the brokerage projects a 16% Dollar revenue CAGR over FY26-28E, translating into a 20-22% EPS CAGR, which is still considered among the stronger growth profiles in the mid-tier IT segment.
Tata Elxsi Ltd: Conservative Outlook Leads to Sell Call
In contrast, MOFSL has retained a 'Sell' rating on Tata Elxsi, setting a target price of Rs 3,350, which suggests a significant 28% downside potential. The brokerage cited a subdued Q4 exit, with revenue growth of only 0.9% quarter-on-quarter in constant currency terms, primarily due to delays in deal closures and elongated decision cycles.
Tata Elxsi's outlook has become more conservative, with FY27 growth guided to be in high-single digits. While the company continues to win new deals across verticals, including transportation and a large consolidation deal in Media & Communication, the conversion of these wins into revenue has been uneven. New deals typically take 9-12 months to scale, and some healthcare deals reportedly slipped into the first quarter of the next fiscal year. MOFSL expects dollar revenue growth to remain moderate at a 7% CAGR over FY26-28, with margin expansion anticipated to be gradual and back-ended.
Disclaimer: This article provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.