Infosys, TCS to HCL Tech: IT stocks crash up to 7.5% as tech rout extends — Time to worry or buy the dip? Explained

IT stocks crash: Indian technology stocks took a beating for the third day in a row on Friday, losing up to 7.5%, tracking an overnight selloff in US tech stocks and spooked by persistent fears of AI-led disruption. Adding to the pressure was the fading hopes of a near-term Federal Reserve rate cut.

The Nifty IT index crashed over 5% to the day's low of 31,422.60, hitting its lowest level since October 2023 and shedding 12% in just three days (considering today's low).

Amid fears that AI-driven automation could disrupt Indian IT's labour-intensive business model, all index constituents traded in the red. Infosys share price emerged as the top loser as it lost 7.5%. Another IT bellwether, Tata Consultancy Services (TCS) stock was down 6%. HCL Technologies' share price was down 5.5% while Wipro and Tech Mahindra lost nearly 4.5% each.

In the overnight trade on Thursday, the tech-heavy Nasdaq Composite index had declined more than 2%.

According to a Mint report, IT stocks have lost ₹4.4 trillion so far in 2026 alone as of Thursday's close.

Why are IT stocks falling?

The key reason behind the selloff, which started last week after Anthropic’s launch of its AI platform Claude, is that AI is creating a structural shift in Indian IT services by reducing timelines and automating tasks, putting pressure on the traditional headcount-based outsourcing model.

Layoffs are likely in routine-heavy areas as fewer people will be needed to deliver the same outcomes. In the coming quarters, AI adoption could create headwinds for deal wins, potentially impacting topline, making close monitoring of deal flow essential to assess its real impact.

Brokerage Motilal Oswal, in a note on February 5, said that increasing adoption of generative AI may erase up to 12% of the sector’s revenue.

“While AI's threat to software coding hours was well known, Palantir's comments put ERP (enterprise resource planning) implementation into the spotlight, which so far could be considered less impacted by AI's productivity gains. Before Palantir's comments on ERP, we estimated 30-40% of IT services revenues at risk from AI deflation, largely focused on app development, maintenance, and testing. Assuming a 30-50% productivity hit on low-level work in these areas, we believe 9-12% of IT services revenue stands to be eliminated. We expect this to happen over 3-4 years, underscoring a ~2% hit on revenue growth each year," the brokerage said.

Investors also looked ahead to the US inflation data later in the day, which is expected to set the tone for the future rate path. The stronger-than-expected jobs data earlier in the week fueled fears that the US Federal Reserve is unlikely to cut rates in the near term, keeping the cost of doing business high in India’s IT sector’s biggest market.

Weak sentiment in US technology stocks rubbed off on Indian IT, too. The tech-heavy Nasdaq Composite index fell more than 2% on Thursday ahead of inflation data and concerns over whether massive AI investments will generate adequate returns.

Big Tech results have revived investor worries about ambitious capital spending this year, with Amazon, Google, Meta and Microsoft collectively expected to spend around $650 billion in the race for AI dominance, as per a Reuters report.

"The sell-off in AI stocks in US markets was expected, but the timing and extent of the sell-off were not known. The 2.04% decline in the Nasdaq is not a crash. But if the downtrend continues, it might pull the US market down," said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Tech selloff: Time to panic?

Several analysts don't see a need for panic selling on the unwinding of the AI trade. They called for a need to be selective.

"For the Indian market, this correction in AI stocks is a positive, because last year’s global rally was primarily an AI trade in which India, an AI laggard, couldn’t participate. So the unwinding of the AI trade, if it persists, is a positive from the Indian perspective," said Vijayakumar.

The real impact of the ‘Anthropic shock’ on the IT sector is yet to be ascertained, and panic selling in IT stocks at this stage may not be a good idea, he opined. "Investors may wait and watch for the dust to settle."

Ravi Singh, Chief Research Officer at Master Capital Services, also echoed similar views, suggesting that for long-term investors, this isn’t a time to panic but a time to be selective.

"This weakness offers a chance to add to high-quality IT names that have strong balance sheets and solid global client relationships. Instead of buying everything indiscriminately, it makes sense to accumulate in stages on dips and watch for clear signs of stability — both in macro trends and earnings expectations," he added.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.