IT stocks crashed another 6% in intraday trading on Monday, March 2, amid the US-Iran war, extending the abysmal performance seen last month amid worries that artificial intelligence (AI) could disrupt the labour-intensive IT sector in India by streamlining project timelines and reducing order wins.
The Nifty IT index kicked off March with an over 2% cut to 29,889, nearing its 52-week low level of 29,875. Meanwhile, shares of several index heavyweights like Tata Consultancy Services (TCS), Infosys, HCL Technologies and Wipro shed between 1.5-3%.
Persistent Systems stock emerged as the worst performer, down 6%. Meanwhile, Coforge shares lost 4.8% to hit their one-year low today.
₹5.7 lakh crore wiped off from IT stocks in a month
IT stocks have come under intense pressure in the last one month following the launch of a series of product releases, mostly by Anthropic, threatening to automate not just software engineering, but also workflows in myriad streams such as legal, financial data sets, cybersecurity, insurance broking, wealth management, and legacy modernisation.
A report by Motilal Oswal Financial Services had estimated that 12-15% of the IT sector’s revenue faces direct exposure to AI-driven productivity/displacement risk, with incremental pressure from third-party software efficiencies and automation layers.
Against this backdrop, IT stocks in India have cracked 10-25% in a month. In February alone, the selloff wiped off ₹5.69 lakh crore from IT stocks’ market capitalisation, according to data from Capitaline.
TCS shares emerged as the biggest wealth eroders, with a ₹176,019 crore m-cap loss, followed by Infosys, whose investors lost a cumulative ₹138,131 crore in a month.
US-Iran war impact on IT stocks
Now, the IT companies are facing a fresh setback in the light of the US-Iran war. The consequences for the IT sector are two-fold: rising exposure to the Middle East and the growing risk-off sentiment that could lower order visibility.
According to a report from Angel One, Indian IT companies have expanded operations in West Asia in recent years as regional economies diversify beyond oil revenue.
For TCS, West Asia and Africa contributed 2.3% of revenue, while for Wipro, which includes Asia Pacific in the same segment, the contribution stood at 11%.
The escalation in the Middle East adds another layer of uncertainty for IT stocks as markets dislike unpredictability, and IT services thrive on stable client budgets and long-term visibility, said Harshal Dasani, Business Head at INVasset PMS.
“A spike in crude, volatility in currencies, and tightening global financial conditions can prompt enterprises — especially in the US and parts of Europe — to reassess discretionary tech spending. That sentiment spillover impacts Indian exporters. The current correction is not about the structural irrelevance of AI; rather, it is about risk compression in a fragile macro environment,” he added.
Until geopolitical clarity improves and global tech spending regains confidence, the sector may continue to see pressure and sharper swings compared to defensive pockets of the market, Dasani opined.
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