IT Stocks: After witnessing some rebound in the previous session, Indian IT stocks including Infosys, TCS, Wipro, HCL Tech and others are back in the red on Wednesday, February 18 following weakness in US tech stocks in overnight deals. The Nifty IT index lost 1.5% in intra-day deals with all its constituents in the red.
The technology sector is facing renewed turbulence as AI-driven disruption intensifies, with growing fears that rapid advances in artificial intelligence could erode the relevance of traditional IT services and deal a significant blow to Indian IT companies.
“AI will render much of legacy software and testing redundant. Just like hyperscalers were initially a significant headwind to infra management services (IMS), and BPO got disrupted in the earlier cycle (2015),” said brokerage firm Motilal Oswal Financial Services in a report earlier this month.
Among individual stocks, Persistent Systems, Infosys, LTI Mindtree, Tech Mahindra and Coforge fell over 2% each while Mphasis, Wipro, L&T Tech, HCL Tech and TCS shed over 1% each.
Moreover, the index is down 21% in last 1 year and 17% in past 1 month.
IT sector witnesses a short-lived recovery
Today’s fall came after a recovery in the previous session. Investors stepped in to buy the dip on Tuesday, February 17 after Indian equities witnessed a sharp ₹4.86 lakh-crore erosion in market capitalisation over the last nine sessions beginning February 4.
Moreover, two key developments helped ease AI-led disruption fears yesterday. The first was Infosys’s strategic collaboration with Anthropic, while the second was the broader messaging that emerged from AI Summit 2026, which highlighted collaboration rather than displacement as the likely AI adoption path.
Infosys announced that it will work with Anthropic to develop and deliver advanced enterprise AI solutions for sectors such as telecommunications, financial services, manufacturing and software development. The partnership integrates Anthropic’s Claude models, including Claude Code, with Infosys Topaz AI offerings, enabling enterprises to automate complex workflows, accelerate software delivery and deploy AI within governance and transparency frameworks required by regulated industries.
However, the recovery was short lived. Concerns that rapid advances in artificial intelligence could disrupt the traditional headcount-based outsourcing model that underpins Indian IT companies continued to haunt the Indian tech stocks in today’s deals. Market participants fear that accelerated AI adoption could weigh on near-term deal wins and delay decision-making by global clients. Furthermore, they believe that this could eventually impact revenue growth, making deal-flow commentary and large contract signings key indicators to watch in the coming quarters.
How long will the sell-off last?
Market experts remain cautious on the near-term outlook for IT stocks, flagging persistent uncertainty and selective investor participation.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said, “The volatility in IT stocks may continue in near term response to incoming news relating to the sector. Overall, IT stocks may remain weak since uncertainty is huge and large institutional investors are unlikely to invest big time unless valuations become compelling.”
He added that capital could continue rotating away from IT toward sectors such as banking and financials, automobiles, telecom and pharmaceuticals, where earnings visibility is currently stronger.
Meanwhile, brokerage house JM Financial believes that FY27 should be better than FY26. It added that while most companies have defended margins in a tough environment, sustaining margins amid higher investments in technology will be challenging unless supported by currency movement.
“NSEIT has underperformed 22%/11% in CY25/CYTD vs Nifty – the sector is unlikely to rerate if concerns over the impact of Gen AI on terminal growth continue. That said, we view these apprehensions on terminal growth as overly pessimistic. In addition, FCF yield continues to inch up – it is likely to provide support in the near term, in our view. We prefer – (a) Infosys in the top 6 (b) Mphasis in the mid-tiers and (c) Sagility among the BPO names,” it stated.
On a more optimistic note, Motilal Oswal Financial Services said concerns around AI-led disruption appear excessive. It added that while long-term questions around whether the industry thrives or merely survives will take time to answer, AI adoption in the medium term is expected to be revenue-accretive. It also noted that rising free cash flow yields could provide near-term support to the sector.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
