IT Stocks Drag Markets Lower as Nifty IT Slides to Fresh Lows on AI and Global Growth Fears

Indian equity markets remained under pressure on Friday, led by a sharp sell-off in IT stocks, as investors continued to pare exposure to the sector amid mounting concerns over artificial intelligence-led disruption, weak global technology cues, and an uncertain interest-rate outlook in the US.

The Nifty IT Index fell 1.5–2% intraday, extending its losing streak for the week and slipping to its lowest level in nearly 9–10 months. With this, the IT index has now declined over 6% this week, putting it on track for its worst weekly performance in almost six years.

Heavyweight IT stocks were among the biggest drags on the benchmarks. Tata Consultancy Services and Infosys fell 1.5–2.5% each, while Wipro, HCL Technologies, and Tech Mahindra declined between 1–3%.

Benchmarks Dragged by IT Heavyweights

The sharp fall in IT stocks weighed heavily on the frontline indices. The BSE Sensex slipped 600–800 points during the session, while the Nifty 50 fell below key short-term support levels. Analysts noted that IT stocks alone accounted for nearly one-third of the headline index losses, underlining the sector’s outsized influence on market direction.

In market capitalisation terms, the IT sector has seen tens of thousands of crores wiped out over the past few sessions, as investors rotated out of large-cap technology names into relatively defensive or domestically driven sectors.

Why IT Stocks are Underperforming?

“The sharp correction in IT stocks reflects a structural headwind rather than a temporary sentiment-driven sell-off,” says Prasenjit Paul, Equity Research Analyst at Paul Asset & Fund Manager at 129 Wealth Fund. He adds, “The rise of agentic AI signals that the conventional manpower-led, linear revenue growth model is under pressure. In our view, the era of broad-based rerating for generic service-driven IT companies is over.” Dipal Dutta, CEO at RedoQ, says, “The launch of advanced enterprise automation tools that can autonomously handle complex business tasks has intensified concerns that traditional labor-intensive IT models may face structural challenges.”

Second, global tech weakness is feeding directly into Indian IT stocks. US technology shares have remained volatile, and any risk-off move globally tends to hit Indian IT exporters harder due to their dependence on overseas clients. Nearly 55–60% of revenues for top Indian IT firms come from North America, making the sector highly sensitive to changes in US growth expectations.

Third, the interest-rate outlook remains unfavourable. Stronger-than-expected US economic data has reduced expectations of aggressive rate cuts by the Federal Reserve in the near term. Higher-for-longer rates typically hurt technology stocks, which are valued on future growth assumptions.

How Deep is the Correction?

From recent highs, the Nifty IT index has now declined by over 15%, significantly underperforming the broader market. On a year-to-date basis, the index has slipped into negative territory, even as select non-IT sectors have managed to stay resilient.

Several frontline IT stocks are trading 10–20% below their 52-week highs, with analysts flagging that earnings downgrades could follow if global deal pipelines remain weak or pricing pressures intensify.

What Investors are Watching Next? 

Market participants say the near-term direction of IT stocks will hinge on:

• Management commentary on deal wins, AI-led spending, and client budgets
• Trends in US tech stocks and Nasdaq movement
• Clarity on US rate cuts and macro data

Until visibility improves, analysts expect continued volatility and limited downside protection in the sector, despite some valuations starting to look attractive on a long-term basis. “While this environment may persist until companies clearly demonstrate that AI can act as a growth lever rather than just a cost-cutting measure, it also presents potential long-term opportunities for investors in high-quality IT firms with strong cash flows and robust business models,” adds Dutta. 

“Corrections of this nature also create divergence. We believe the next set of multibaggers will emerge from niche IT segments where the broader sell-off has compressed valuations indiscriminately,” says Paul. He adds, “This phase offers an attractive opportunity to selectively accumulate IP-led product software companies with strong client stickiness and durable competitive moats, particularly those operating in mission-critical domains such as banking, healthcare, and defence. For these high-moat players, agentic AI is not a disruption but an enabler. It can deepen integration within client workflows, enhance automation, expand margins, and strengthen pricing power. As the cycle turns, such structurally advantaged businesses are likely to compound earnings meaningfully, laying the foundation for the next generation of IT multibaggers."

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