Battered technology stocks led a sharp sell-off on Dalal Street on Tuesday, dragging the benchmark indices lower as mounting fears of artificial intelligence (AI)-led disruption triggered fresh panic in a struggling IT sector.
Even as the benchmark BSE Sensex closed 1.28% down at 82,225.92, its peer Nifty 50 closed 1.12% lower at 25,424.65, weighed by a steep 4.7% fall in the Nifty IT index—its fifth straight session of losses.
The Nifty IT index has now plunged 24% so far this year, wiping out ₹3.04 trillion in investor wealth on Tuesday alone.
Analysts warn that the structural impact of on India’s $200-billion-plus IT export engine is only beginning to be priced in. While Indian IT firms are stepping up investments in AI, experts say meaningful gains could take years to materialise, leaving the sector vulnerable to further valuation corrections in the near term as fears of automation-led revenue pressure intensify.
Notably, foreign institutional investors (FIIs) net sold shares worth $8,755 million in 2025 in Indian IT companies after buying $2371 million in 2024. So far this year, they have sold shares worth $204 million in IT companies, data from NSDL showed.
“I expect the market to trend in a range of 25,200-26,000 in the March series, but if AI fears spread further, all bets will be off the table,” said Rajesh Palviya, head of derivatives & technicals at Axis Securities.
There were some positive voices, too. Siddarth Bhamre, head of institutional equities at Asit C Mehta Investment Intermediates Limited, said that quarterly numbers for IT companies are unlikely to be as bad as what the market is currently visualising.
The negative impact in the will only materialise over the next 3-4 quarters and not immediately and, hence, near-term results for the sector should not look negative, he said.
“At some point, as valuations correct, it could lead to a bounce in IT stocks. However, it will be momentary as the IT sector is facing a structural disruption,” Bhamre said.
To be sure, selling pressure was widespread across global markets on Tuesday, with the Nasdaq (-1.2%), S&P 500 (-1.04%) and Hang Seng (-1.9%) leading the declines. European bourses also felt the heat, with UK’s FTSE slipping 0.4%, France’s CAC 40 easing 0.3% and Germany’s DAX falling 0.2%.
South Korea’s Kospi and Japan’s Nikkei 225 bucked the trend, rising 2% and 1%, respectively.
The IT meltdown
On Monday (23 February), Jefferies downgraded six Indian IT majors including , HCL Tech and TCS, stating that the pain caused by artificial intelligence-triggered disruption is not yet over.
“Application development, legacy modernisation, and IT maintenance make up the core of India’s $220-billion IT export engine,” Tanvi Kanchan, associate director at Anand Rathi Share and Stock Brokers Limited said. “AI is beginning to commoditise exactly that. This is a structural re-rating, not a quarterly correction.”
Within the MSCI India universe, IT had another muted quarter with earnings growth of 2% on a year-on-year basis in Q3FY26, a JP Morgan report dated 16 February noted.
“The sector continues to face major headwinds due to disruption from AI. The current demand softness on account of global macroeconomic uncertainty and slow client decision-making continues to impact discretionary IT spending,” the report added.
What about foreign investors?
FIIs have net sold Indian equity worth ₹16,632.21 crore in 2026 so far, while DIIs (domestic institutional investors) have net purchased Indian shares worth ₹82,039.68 crore.
Kanchan of Anand Rathi said the markets are stuck between global uncertainty above and domestic institutional support below.
“February has seen consistent FII inflows after months of selling, and when large foreign money starts coming back, you don’t ignore it. Domestic institutions are also stepping in on every meaningful dip. These flows are the market’s shock absorber,” Kanchan said.
Alongside, experts said uncertainty around US tariffs also pulled the benchmark index down, with US President Donald Trump announcing new tariffs after the country’s Supreme Court struck down large parts of tariffs imposed earlier as illegal.
In a social media post, wrote, “Any country that wants to play games with the ridiculous Supreme Court decision, especially those that have ripped off the USA for years, and even decades, will be met with a much higher tariff. And worse than what they agreed to.”
With inputs from Dipti Sharma