IT stocks remained under pressure on Tuesday, dragging the Nifty IT index lower for the fifth consecutive trading session, as global brokerages turned cautious on the sector amid rising concerns over artificial intelligence-led disruption and slowing growth visibility.
AI startup Anthropic has recently stated that its Claude Code could help modernise COBOL, a programming language.
KEY HIGHLIGHTS
- Nifty IT falls for 5th straight session
- Heavyweights Infosys, TCS, Wipro hit 52-week lows as index slides 3.5%
- HSBC flags 14–16% AI-led revenue deflation risk
- CLSA, Jefferies cut TPs; warn of higher downside risk
Nifty IT dropped 3.5 per cent to hit an intraday low of 30,417.75, slipping from its previous close of 31,550.50, with all constituents trading in the red. Among the heavyweights, Infosys and TCS tumbled 3.5–4 per cent, touching 52-week lows of ₹1,277.10 and ₹2,571, respectively. Wipro fell 3 per cent to a 52-week low of ₹199.65, compared with its previous close of ₹205.89.
HCL Tech declined more than 4 per cent to an intraday low of ₹1,362.90, down from its earlier close of ₹1,426.20.
The Nifty IT index has declined about 16 per cent YTD, with analysts warning that downside risks outweigh potential upside in the near term.
Brokerages flag AI-driven revenue risks
HSBC Global Research said it now expects a 14 – 16 per cent gross deflationary risk from AI over the next few years to overall sector revenues, compared with its earlier estimate of 8–10 per cent. Analysts led noted that while proactive companies may offset some of the pressure through alternative revenue streams and productivity gains, the near-term impact of AI-led pricing disruption could weigh on growth. The brokerage added that although US corporate results remain strong and the macro backdrop for IT spending in 2026 appears favourable, Indian IT valuations are not cheap in absolute terms, even if they look undemanding on a relative basis.
Target price cuts
CLSA trimmed target prices across the Indian IT pack, reflecting a more cautious outlook. While maintaining outperform ratings on select names, the brokerage reduced price targets for Infosys, TCS, LTIMindtree, Persistent Systems, Coforge and Tech Mahindra. It retained hold ratings on HCLTech and Wipro, albeit with lower targets.
CLSA said channel checks indicate no significant change in IT services positioning in the AI era so far, but added that continued sector de-rating could challenge long-term growth assumptions despite expectations of a potential macro upcycle in CY26.
Earlier, , citing structural changes in business models stemming from disruption caused by AI tools. The brokerage downgraded TCS to underperform from hold and cut Infosys and HCLTech to hold from buy.
LTIMindtree and Hexaware Technologies were downgraded to underperform, while Mphasis was cut to hold. Jefferies said IT stocks currently offer higher downside risk than upside even after the sharp correction this year.
However, the brokerage identified Coforge, Sagility and Inventurus Knowledge Solutions as its top picks in the sector.
The sustained selling pressure underscores growing investor unease that rapid advances in AI could compress pricing power and reshape traditional outsourcing models, prompting a reassessment of growth and valuation assumptions across the IT services industry.