India’s IT bellwether Infosys has slipped out of the country’s top 10 most valuable companies after losing more than Rs 2 lakh crore in market value this year, marking a sharp shift in how investors are looking at the sector.
The fall has been steep. The stock is down around 30% so far this year, with a sharp sell-off triggered after its latest earnings announcement.
With its market capitalisation now at around Rs 4.9 lakh crore, Infosys has dropped out of the top 10 list, while LIC has moved in with a valuation of about Rs 5.1 lakh crore.
This is not just about one company losing value. It reflects a broader re-rating of India’s IT sector.
Infosys reported steady numbers in the March quarter, with revenue rising 13% and profit also increasing. But the problem was its outlook. The company guided for just 1.5% to 3.5% revenue growth for FY27, which fell short of market expectations.
Investors are now questioning whether the high-growth phase of IT is over, at least for now.
Brokerages say demand remains weak as global clients cut spending and focus more on cost efficiency rather than expansion.
The slowdown is being driven by a shift in client behaviour.
Companies across sectors are delaying large transformation projects and focusing on saving costs. This is directly impacting IT services firms like Infosys, whose revenues depend on such deals.
At the same time, while large deals continue to be signed — Infosys reported $14.9 billion in deal wins for FY26 — execution timelines are getting longer, delaying revenue visibility.
A key overhang on the sector is artificial intelligence.
Infosys has been investing in AI platforms like Topaz and has deployed AI tools across its workforce. But analysts say AI is a double-edged sword.
While it creates new opportunities in data, cloud and automation, it is also reducing demand for traditional services.
“AI-led productivity gains are being passed on to clients, leading to deflation in the core business,” analysts have noted.
This means IT firms may have to do more work for the same or even lower revenue.
Market experts believe the issue goes beyond company performance and points to a larger shift.
Navy Vijay Ramavat, Managing Director at Indira Securities, said India has not benefited from the global AI boom the way other markets have.
“If you look at global markets like Nasdaq, they are hitting record highs because of AI. But India has missed that AI run,” he said.
He added that the country’s biggest strength — IT services — is now under pressure.
“Our flagship sector, which took many Indians from lower-middle class to upper-middle class, is IT. That sector is now getting disrupted. The positive impact of AI has not come to India, but the negative impact has,” he said.
Ramavat said this is part of a natural market cycle where leadership keeps shifting.
“In every bull run, new sectors emerge. Earlier it was IT in the 2000s, then real estate, then capital goods, then chemicals after Covid,” he said.
According to him, the next wave of growth is likely to come from new sectors.
“Today, sectors like semiconductors, data centres and manufacturing are emerging. Wherever there is a government push, that sector tends to do well,” he said.
He pointed to areas such as:
Semiconductors, data centre infrastructure, CDMO (contract drug manufacturing), energy and power, and shipbuilding.
These sectors are seeing policy support and investment, making them potential drivers of the next bull cycle.
Another factor impacting Indian IT stocks is global capital flow.
Money is moving towards countries benefiting from AI-led growth, such as the US, South Korea and Taiwan.
A large part of foreign investment is going into companies linked to chips and AI infrastructure, leaving traditional IT services firms behind.
Infosys now trades at around 18 times forward earnings, lower than earlier levels, showing that valuations have adjusted to the new growth reality.
Analysts say the company is focusing on improving efficiency, exiting low-margin deals and moving towards higher-value services. But these changes will take time to reflect in earnings.
Infosys dropping out of India’s top 10 most valuable companies is a signal of a larger shift in the market.
The IT sector, once seen as a steady wealth creator, is entering a phase of change where growth is slower and business models are evolving.
At the same time, new sectors backed by policy support and global trends are attracting investor attention.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)