The selloff in information technology stocks deepened on Thursday, with the Nifty IT index emerging as the worst-performing sectoral index as concerns over rising inflation, elevated interest rates and rich valuations in artificial intelligence-linked companies weighed on sentiment.
The weakness in domestic technology stocks mirrored a sharp overnight decline in global technology shares. US markets ended lower, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite falling 1.9 per cent, 1.6 per cent and 2.0 per cent, respectively, amid continued selling in technology stocks, hotter-than-expected US inflation data for May 2026 and escalating US-Iran tensions.
Nifty IT remains under pressure
The Nifty IT index fell as much as 2.6 per cent to 27,519.15 in early trade, from its previous close of 28,279.90.
Although the broader market recovered some losses during mid-session trade, the IT index continued to underperform and remained down around 1 per cent.
The index has fallen 11.5 per cent since June 2, 2026, (recording a closing value of 31116.55).
Top losers
, and were among the biggest losers, declining 2-3 per cent at the time of writing. Heavyweights and also traded lower.
Tech Mahindra, which had fallen nearly 3 per cent in early trade, recovered its losses and was trading flat.
Among midcap IT stocks, Persistent Systems declined as much as 4 per cen,t before paring losses to trade flat at ₹4,906 at 11.59 am. Coforge also shed around 3 per cent in early deals.
AI disruption concerns add to pressure
According to Sumit Pokharna, SVP – Fundamental Research at Kotak Securities, apart from the global risk-off sentiment, concerns around rapid advances in artificial intelligence are adding to pressure on the sector.
“Nifty IT Index is down around 2 per cent today, and in the last six months it has fallen around 27 per cent,” Pokharna said.
He noted that Anthropic’s recently launched Claude Fable 5 and Mythos 5 models have intensified concerns around revenue deflation for Indian IT services companies, particularly those with significant exposure to application development and maintenance (ADM) services.
According to Pokharna, the new AI models deliver significantly stronger software engineering capabilities, with AI-generated code quality approaching human levels and potentially surpassing it within the next year.
“The key concern is that productivity improvements in software engineering are occurring much faster than in non-software domains. This increases the risk of lower effort requirements, reduced billing volumes, and pricing pressure for traditional application development and maintenance contracts,” he said.
Pokharna added that companies with larger exposure to application services could face greater disruption than peers focused on infrastructure, cybersecurity, engineering services or business process outsourcing.
Among large-cap IT companies, Infosys is considered relatively more exposed to application services, while HCLTech has comparatively lower exposure. Persistent Systems has one of the highest exposures to application development, he noted.
“The pace at which enterprises integrate AI models into software delivery workflows will be the key factor determining the magnitude of disruption for the IT services industry over the next three years,” Pokharna said.
Anthropic, meanwhile, is preparing for an initial public offering and submitted a draft Form S-1 registration statement to the US Securities and Exchange Commission on June 1, 2026.