TCS, Infosys to Wipro: Nifty IT index sees worst fall since 2008 financial crisis, drops 32% from peak

IT stocks: Shares of IT stocks including Infosys, Tata Consultancy Services (TCS), Wipro, and other technology stocks slid again on Monday, February 16, marking the fourth straight session of losses for the sector as concerns over artificial intelligence-led disruption continued to weigh on investor sentiment.

The Nifty IT index slipped 1.1% in intraday trade. Over the past four sessions, the index has declined 9.5%. From its record peak, the IT index is now down 32%, making this its steepest drawdown since the 2008 Lehman crisis. The index hit its record high of 41,530.3 in December 2025.

The prolonged weakness follows a sharp correction over the past two years. After dropping about 13% in 2025, the index has fallen a further 15% so far in 2026. The sustained sell-off reflects growing fears that rapid advances in artificial intelligence could disrupt the traditional outsourcing-led business model of Indian software services firms and weigh on future earnings growth.

IT stocks today

Shares of frontline IT companies traded largely lower, reflecting sustained pressure across the sector. Infosys declined over 2% in intraday trade, while Tech Mahindra slipped more than 1%. Wipro and LTIMindtree were down close to 1% each. Other large names including TCS, HCL Technologies and Mphasis also traded in the red with modest losses. In contrast, Coforge and Persistent Systems bucked the broader trend, posting marginal gains.

Reasons for the recent fall

The renewed weakness in IT stocks traces back to earlier this month, when concerns intensified around artificial intelligence potentially increasing competitive pressure within the software industry. Investor sentiment turned cautious after Anthropic launched a legal-focused AI tool for its Claude chatbot, raising fears that AI-driven solutions could disrupt traditional software and services models by lowering entry barriers and intensifying competition.

Macro cues have added to the pressure. In the US, job growth surprised on the upside in January, while the unemployment rate edged down to 4.3%. These signs of labour market resilience have strengthened expectations that the Federal Reserve could keep interest rates unchanged for longer as policymakers continue to assess inflation trends, weighing on rate-sensitive technology stocks.

IT Sector: Outlook ahead

According to ICICI Direct, the IT industry is undergoing a structural transition marked by increased AI adoption, workforce rationalisation, productivity improvements and valuation re-adjustments. At the same time, it pointed out that the magnitude of the correction is close to historical averages and valuations are trading below long-term norms.

Against this backdrop, the brokerage said selective positioning remains constructive, with a clear focus on companies building strong AI capabilities, strengthening digital services, and maintaining balance sheet resilience.

Prabhakar Kudva, Director and Principal Officer - Portfolio Management Service, Samvitti Capita stated that with AI adoption accelerating across enterprises, large-cap IT services companies are likely to face meaningful headwinds going forward. In our view, significant upside in these names remains limited.

“While our advised portfolio does not carry exposure to this segment, if you hold any large-cap IT services positions elsewhere, we would recommend reviewing them. The ongoing market correction presents a good opportunity to reallocate that capital into themes with stronger earnings growth tailwinds — areas which are well-positioned to outperform IT services over the medium to long term,” he suggested.

Meanwhile, Motilal Oswal Financial Services (MOFSL) noted that the current valuations of the IT sector already reflect muted growth expectations for the sector. Based on its reverse discounted cash flow (DCF) analysis, prevailing stock prices imply an average 10-year free cash flow CAGR of around 6.5%. MOFSL estimates that about 12–15% of sector revenues face direct exposure to AI-led productivity gains and displacement risks, with additional pressure likely from automation layers and third-party software efficiencies.

MOFSL also flagged a structural concern that AI tools could enable enterprises to generate more code in-house, reducing dependence on external IT vendors and challenging the traditional pay-per-seat software model. Providing historical context, the brokerage noted that the IT services industry initially scaled because enterprises struggled to manage large volumes of self-built, non-standardised and security-vulnerable code.

Over time, this shifted toward packaged software with vendor-led customisation. Today, self-built software accounts for about 14% of total software spend, down sharply from 35–40% in the 1990s, underscoring how technology cycles continue to reshape the industry.

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.