HFCL shares slip 10% in two sessions after sharp 165% rally in 2026

Synopsis

HFCL shares have corrected about 10% in two sessions after a sharp 165% rally in 2026, driven largely by profit booking. Despite strong fundamentals, rising order inflows, and robust earnings recovery, elevated valuations and overbought technical indicators suggest the possibility of near-term consolidation in the stock.

HFCL shares extended their decline on Monday, falling nearly 5% in intraday trade to Rs 177.87, marking a second consecutive day of losses. The stock has now corrected about 10% in just two sessions, largely driven by profit booking after a stellar multi-month rally.

Despite the recent pullback, HFCL remains one of the standout performers of 2026, having surged nearly 165% during the year on the back of strong defence orders, rising optical fibre demand, and robust order inflows.

A key driver behind HFCL’s sharp upmove has been the growing global demand for high-speed digital infrastructure, fuelled by the rapid expansion of AI technologies. Optical fibre networks are increasingly seen as the backbone of this transformation, placing companies like HFCL in a strong structural growth position.

Operationally, the company delivered a strong turnaround in the March quarter. Revenue nearly doubled year-on-year to Rs 1,824 crore, while EBITDA improved significantly to Rs 315 crore, compared to a loss in the previous year. Net profit also swung to Rs 184 crore from a loss of Rs 83 crore, reflecting a clear improvement in business fundamentals.

According to Balaji Rao, Research Analyst at Bonanza, “The structural shift is real, product revenue has grown from 27% of the mix in FY21 to 59% in FY26, and exports now account for 41% of revenue. That’s a business fundamentally changing its character.”

Order inflow remains supportive

Recently, HFCL received a purchase order worth approximately Rs 135.09 crore from RailTel Corporation of India, a Government of India PSU under the Ministry of Railways. The order is for the annual maintenance contract of the “Secure Operations Network” project for data centres supporting Indian defence forces.

Valuation and technical concerns emerge

After the sharp rally, valuation comfort has reduced, with HFCL trading at a price-to-earnings multiple of around 91.93, significantly higher than many peers in the telecom equipment space.

From a technical standpoint, the stock also appears stretched. According to Trendlyne data, the 14-day Relative Strength Index (RSI) stands at 73.1, a level typically considered overbought, indicating the possibility of short-term consolidation or a pullback.

In the March 2026 quarter, Foreign Institutional Investors slightly reduced their stake from 7.48% to 7.08%, while Mutual Funds increased their holdings from 6.68% to 6.92%, suggesting selective institutional interest despite recent volatility.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times.)

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