Indian IT Stocks Witness Sharp Decline

Market Overview

The Nifty IT index has plummeted 21% in February, marking its worst monthly performance in nearly 23 years. This decline has significantly impacted the Indian stock market's benchmark index, with IT companies commanding over 10% weightage.

Impact on Mutual Funds and LIC

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The selloff in IT stocks has resulted in a significant loss for mutual funds and Life Insurance Corporation of India (LIC). Mutual funds have faced a loss of nearly ₹64,000 crore, while LIC has suffered a whopping ₹37,000 crore loss. The data analysis by Mint shows that all 10 Nifty IT stocks have lost between 17-27% this month so far.

Top Losers

• Coforge: 26.8% fall
• TCS: 16% fall
• Infosys: 17-27% fall

Impact on Mutual Fund Portfolios

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

• Infosys: ₹26,000 crore wiped off from mutual funds' portfolios, which hold over 22% stake in the company as of the December quarter
• TCS: ₹9,000 crore dent to notional wealth for mutual funds and LIC due to a 16% fall

Cumulative Loss

The Nifty IT companies have lost a cumulative ₹5 lakh crore in wealth amid the AI-triggered meltdown.

Reasons Behind the Decline

The $300-billion IT services industry is facing fears that AI could compress project timelines, impact deal wins, and eat into the profits of the labour-intensive delivery model of IT companies in India. The sector is heavily dependent on the US and Europe, and lingering doubts about their growth outlook, slower-than-hoped Fed rate cuts, and more cautious IT budgets are all showing up in softer deal flow and delayed decisions.