Tech Stocks Weigh on Indian Equities as AI Fears Impact on IT Sector

Market Update: Indian IT Sector Drags Down Benchmark Indices

The Indian technology sector led a sharp sell-off on Dalal Street on Tuesday, with the benchmark BSE Sensex closing 1.28% down at 82,225.92 and the Nifty 50 closing 1.12% lower at 25,424.65. The Nifty IT index suffered a steep 4.7% fall, its fifth consecutive session of losses, wiping out ₹3.04 trillion in investor wealth.

The sell-off was driven by mounting fears of artificial intelligence (AI)-led disruption, which experts warn is only beginning to be priced in. While Indian IT firms are investing in AI, meaningful gains may take years to materialise, leaving the sector vulnerable to further valuation corrections in the near term.

Foreign Institutional Investors (FIIs) net sold shares worth $8,755 million in Indian IT companies in 2025, after buying $2371 million in 2024. So far this year, FIIs have sold shares worth $204 million in IT companies.

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Analysts expect the market to trend in a range of 25,200-26,000 in the March series, but warn that AI fears could spread further, leading to a sharp sell-off. However, some experts are more optimistic, noting that quarterly numbers for IT companies may not be as bad as the market is currently visualising.

Key Statistics:

• Nifty IT index: -4.7% (fifth consecutive session of losses)
• Nifty IT index: -24% so far this year
• Foreign Institutional Investors (FIIs): net sold shares worth $8,755 million in Indian IT companies in 2025
• Investor wealth wiped out: ₹3.04 trillion on Tuesday alone
• MSCI India universe: IT earnings growth of 2% on a year-on-year basis in Q3FY26

Market Outlook:

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The Indian IT sector is facing a structural disruption, with AI-led disruption expected to have a long-term impact on the sector. While some experts are optimistic about the sector's potential for recovery, others warn that the sector is vulnerable to further valuation corrections in the near term.

Global Markets:

The sell-off was not limited to the Indian market, with global markets also experiencing a sharp decline. The Nasdaq, S&P 500, and Hang Seng led the declines, while the Kospi and Nikkei 225 bucked the trend, rising 2% and 1%, respectively.