The Indian IT sector is heading into earnings season under a cloud of uncertainty, and investors are once again asking the big question: is this the right time to buy the dip?
Nifty IT index has lost 23% year-to-date, dragged lower by fears of AI-led disruption, macro uncertainty and concerns around future demand. The pressure intensified after the launch of Anthropic’s Claude Cowork plug-ins and Claude Code’s ability to understand and modernise COBOL, developments that triggered a broad repricing across IT services and SaaS companies.
Now, all eyes are on Tata Consultancy Services (TCS), which is scheduled to announce its Q4FY26 results on April 9, kicking off earnings season for the sector. That will be followed by Wipro on April 16, HCL Tech on April 21, Tech Mahindra on April 22, and Infosys on April 23.
What to expect from IT sector in Q4?
Brokerages believe the March quarter itself may not deliver major shocks, but management commentary will be crucial.
“After a whirlwind couple of months (NSEIT down 23% YTD), driven by narrative shocks, we expect 4QFY26E numbers to be somewhat uneventful: we see no major disruptions from the ongoing war on numbers yet,” said Motilal Oswal Financial Services.
The brokerage noted that while deal wins could face short-term pressure, there is still no major evidence of AI-led deflationary shocks in reported numbers yet. At the same time, it cautioned that both these trends are backward-looking, and if geopolitical tensions persist or AI capabilities evolve faster than expected, demand could come under pressure over the next two to five years.
That is why investors should focus less on headline earnings and more on FY27 guidance, demand outlook, discretionary tech spending, BFSI commentary, and deal wins.
Domestic brokerages expect TCS to post year-on-year growth of 6-8% in revenue, while profit is seen rising in the low teens during the quarter under review. Margins will also be supported by the cross-currency tailwinds.
For TCS, Motilal Oswal expects Q4 revenue at ₹69,600 crore, up 8% year-on-year and 3.8% quarter-on-quarter, while net profit is seen rising 12.1% YoY to ₹13,800 crore. Margins are expected to get support from cross-currency tailwinds. TCS had also declared a dividend of ₹57 per share, including an interim dividend of ₹11 and a special dividend of ₹46.
For the broader sector, Motilal Oswal expects QoQ constant currency growth for large caps in the range of -1.0% to 1.5%, while mid-caps are expected to outperform again with growth between -0.5% and 3.5%. It sees aggregate revenue for its coverage universe rising 11.3% YoY, while EBIT and PAT are likely to grow 12.9% and 10.8% YoY, respectively.
Is this the right time to buy IT stocks?
Even amid the caution, brokerages are not walking away from the sector entirely — but they are becoming more selective.
“Among large caps, we prefer HCLT and Tech Mahindra, while COFORGE remains our top mid-cap pick,” said Motilal Oswal Financial Services.
The brokerage said it likes HCL Tech because it remains the fastest-growing large-cap IT services company, with an all-weather portfolio that is better positioned in an uncertain demand environment. For Tech Mahindra, it sees signs of improvement under new leadership, especially in BFSI, while Coforge continues to stand out due to its strong executable order book and resilient client spending.
Motilal Oswal expects Infosys to guide for FY27 revenue growth of 1.5% to 4.5% YoY in constant currency terms, while HCL Tech is expected to guide for 3% to 6% YoY constant currency growth in services. It also sees margin trends staying largely range-bound for TCS, Infosys, Mphasis and Persistent Systems, while Wipro and HCL Tech may face pressure due to factors such as wage hikes, slower growth, restructuring and product weakness. Among mid-caps, Hexaware and LTTS may also see some pressure due to ramp-ups, seasonality and wage hikes.
For investors, that makes this earnings season less about the quarter gone by and more about what comes next. If management commentary suggests that demand is holding up and AI disruption remains manageable in the near term, the recent correction could start to look like an opportunity. But if guidance turns cautious, the pain in IT stocks may not be over yet.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
