Indian shares have lagged their Asian
and emerging market peers so far in February, pressured by a
$68.6 billion rout in the market value of information technology
stocks, as investors fretted over disruptions linked to
artificial intelligence.
The Nifty 50 index has risen 0.4% so far this month,
while the Sensex edged 0.1% lower, underperforming both
the MSCI Asia ex-Japan and MSCI Emerging Markets indexes.
The 10 Nifty IT constituents have lost a combined
$68.6 billion in market capitalisation in February, as of the
last close, with the index down 21% and on course for its worst
monthly performance in nearly 23 years.
All 10 index members have fallen between 16.8% and 27% in
February to date. Coforge is the steepest percentage
decliner, down 26.8%, while Tata Consultancy Services
and Infosys have led the value erosion, losing about
$21.9 billion and $16.3 billion in market value, respectively.
The selloff reflects growing concerns that rapidly advancing
automation tools could compress project timelines and disrupt
the labour-intensive delivery model underpinning India’s roughly
$300-billion IT services industry.
Investors have zeroed in on the AI-driven automation push
from U.S. firms such as Anthropic and Palantir, heightening
concerns over faster project execution, pricing pressure and
reduced billable hours.
Brokerages warn the Indian IT sector could face further
pressure if AI starts to eat into application services revenue,
which typically accounts for 40% to 70% of total revenue for
these companies.
“There are no easy answers to whether AI eventually renders
IT services obsolete over the long term,” said analysts led by
Abhishek Pathak of Motilal Oswal.
“The narrative that AI is coming for not just IT but large
swathes of the economy could be too strong to shake, at least in
the short term,” Motilal Oswal analysts said.
A slowdown or contraction in India’s IT sector, whether
through layoffs or reduced hiring, can have immediate
consequences on both residential and commercial real estate
demand. The Nifty Realty index has risen roughly 2%
in February, following a nearly 18% decline over the past three
months.
Concerns over Indian IT companies have also accelerated
foreign selling in the sector in 2026 so far.
While FPIs have turned buyers of Indian stocks in February
on an overall basis, they pulled out about 110 billion rupees
($1.21 billion) from IT stocks in the first half of February,
following a record 750 billion rupees of net selling in 2025.