Nifty IT Index Posts Worst February Performance in 23 Years Amid Growing Fears of AI Disruption

Nifty IT Index Declines 21% in February, Worst Monthly Fall in 23 Years

The Nifty IT Index has experienced a significant decline of 21% in February 2026, marking its steepest monthly fall since April 2003, when it dropped 24%. The sector's market capitalization has lost over Rs 6.4 lakh crore so far this month.

Individual stocks in the sector have also seen significant declines, with Infosys falling 21%, TCS declining 19%, and Wipro losing 24%. Tech Mahindra and HCL Tech have dropped 16% and 18%, respectively.

The recent selloff is attributed to concerns over artificial intelligence-led disruption, which may lead to contract cancellations and a shift towards AI-driven coding tools. As per a report by Citrini Research, India's IT services sector exports over $200 billion annually and is the single largest contributor to the country's current account surplus.

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Mutual funds have reduced their investments in IT stocks by over Rs 70,000 crore, with current holdings standing at Rs 3.2 lakh crore in February, down from Rs 3.95 lakh crore in January 2026. Foreign institutional investors have also seen a decline in their holdings, falling by nearly Rs 85,000 crore to Rs 4.49 lakh crore as of February 15, the lowest level in four years.

Global brokerages Jefferies India and CLSA have revised their stance on the sector. Jefferies has cut its earnings estimates by 1 to 4% and expects a 6% earnings compound annual growth rate over FY26-28. The brokerage has also cut price targets by up to 33% and downgraded several stocks, including Infosys, HCL Tech, and TCS.

CLSA, on the other hand, believes that fears of AI-led disruption in Indian IT services are overdone. The brokerage has maintained selective stock preferences, including Infosys, Tech Mahindra, Coforge, and Persistent Systems, while cutting price targets across the board due to valuation derating.