Corporate Strategies

IT Stock Crash Shaves ₹2.5 Lakh Crore Off Market Value

Indian IT stocks slide as the Nifty IT index drops 8%, erasing ₹2.5 lakh crore amid AI disruption fears, heavy foreign selling and outsourcing growth concerns.

Vijay Chaudhary

Feb 9, 2026 - 16:08

Feb 9, 2026 - 17:52

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IT Stock Crash Shaves

Indian technology shares slumped sharply over the past three trading sessions, with the Nifty IT index falling about 8% and wiping out nearly ₹2.5 lakh crore in market capitalisation, rattling investors and prompting analysts to reassess fundamentals in a sector once considered a steady engine of growth.

Selloff Spurs on Global AI Disruption Fears

Shares of major IT firms, including Tata Consultancy Services, Infosys, Wipro, HCL Technologies and others, slid across Indian exchanges as automated tools developed by global AI firms sparked anxiety about the future of labour-intensive services that underpin much of the industry’s revenue.

According to market data, the Nifty IT index, which tracks top listed technology stocks, declined roughly 8% since Tuesday, erasing an estimated ₹2.5 lakh crore from investor wealth. Investors cited a disruptive wave of advanced AI automation tools that could displace elements of traditional outsourcing, a core business model for Indian IT companies.

A Reuters analysis highlighted that this selling pressure marked the worst weekly performance for the IT index in four months, as the broader market also faced weakness. Foreign portfolios offloaded significant stakes in Indian IT names, reflecting deep uneasiness over the sector’s earnings trajectory amid technological change.

Timeline: From Early Weakness to Sharp Drop

Signs of stress in Indian technology stocks emerged over recent weeks, with analysts noting heightened volatility earlier in the year. On 4 February, shares of top IT firms fell as much as 7% in a session triggered by global tech sell-offs following an AI product launch, a move that also dragged the benchmark Sensex down.

By the end of last week, concerns had deepened, and Monday’s session accelerated losses. The Nifty IT index’s slide continued for a third straight session on Tuesday, translating investor fears into substantial m-cap erosion.

Market watchers note that the current downturn reflects broader doubts about whether traditional application services and outsourcing roles will remain resilient in an age of increasing AI adoption — especially amid a global shift toward automation tools capable of performing tasks once staffed by human labour.

Sector Leaders Bear the Brunt

Data aggregated by market analytics firms show that some of the largest erasures in value came from flagship IT exporters. Tata Consultancy Services saw a significant share price drop, eroding tens of thousands of crores of its market value. Infosys and HCL Technologies also registered marked declines in their capitalisation.

These declines followed the launch of a suite of AI automation tools by US-based startup firms, which quickly became a focal point of investor anxiety. The tools are marketed as enhancing workplace productivity, but investors fear broader revenue impacts for traditional IT outsourcing work.

Foreign institutional investors continue to play a crucial role in shaping market dynamics. Last year alone, they sold Indian IT stocks worth a record $8.5 billion, underscoring mounting concerns over long-term industry change.

Broader Market Implications

The technology sector’s downturn is a significant development for India’s equity markets, where IT firms contribute disproportionately to benchmark indices. A meaningful selloff in this segment can exert downward pressure on overall market performance, influence investor confidence and reshape asset allocation strategies.

Analysis from brokerage houses indicates that the volatility has begun spilling into broader equity sentiment, with some investors trimming positions in correlated sectors and reallocating capital toward perceived safe havens, including defensive stocks and commodities.

Concerns also extend to corporate earnings projections. Analysts at Jefferies and Motilal Oswal have projected that as much as 9–12% of the industry’s revenue could face pressure over the next four years due to rising automation, potentially denting profit margins if digital transformation does not offset outsourcing declines.

Official and Analyst Responses

Market officials and strategists have urged investors to weigh long-term fundamentals against short-term concerns. Some brokerage reports argue that the current rout may be an exaggerated reaction, pointing out the continued demand for bespoke IT services and digital transformation projects that still require human expertise.

Despite the pessimism, Tata Consultancy Services and other large IT firms have reiterated commitments to integrating AI into their service offerings, framing it as an opportunity rather than purely a threat. They reported ongoing deal wins in cloud computing and machine learning applications that could cushion the impact of automation fears.

What Investors Are Advised

With volatility high, financial advisors recommend that long-term investors focus on core business models and earnings quality rather than short-term price fluctuations. Prudent portfolio diversification and attention to valuations are among the risk-management strategies cited by wealth managers.

The scale of the recent IT stock crash has reignited debate about how Indian markets will adjust to AI. driven change. Key stakeholders, including corporate leaders and policymakers, are expected to closely monitor developments as the broader implications for employment, service delivery models, and global competitiveness continue to unfold.