The Nifty IT Index is set to record its steepest February decline in over two decades, sinking more than 21% as AI‑driven uncertainty rattles tech stocks. The slide reflects a blend of macro slowdown and fresh fears that generative AI could upend legacy coding work, leaving investors questioning whether the plunge signals a buying chance or a warning sign.
AI‑Driven Anxiety Triggers Market Shock
Earlier this week, a claim that AI model Claude could automate COBOL code—still the backbone of many banking and insurance systems—sent tremors through the sector. The prospect of AI replacing a large chunk of India’s IT services revenue sparked a sell‑off that echoed broader tech jitters worldwide.
Key Stocks Feel the Impact
Companies most exposed to legacy code work led the decline. Persistent Systems and HCLTech each shed roughly 7‑8%, while giants like Infosys, TCS and Wipro slipped 4‑6% in a single session. The broad‑based drop pushed the Nifty IT Index to an eight‑year low relative to the Nifty 500, catching the eye of investors hunting deep‑value opportunities.
Is the Drop a Buying Opportunity?
Veteran investor S. Naren warns that low valuations alone won’t guarantee a rebound. “The sector is in flux, and heightened fear around AI‑driven disruption adds to existing challenges,” he said, noting that Indian IT earnings have struggled to grow beyond single‑digit rates for years. He cautions that without clear growth pathways, any upside could be limited.
On the technical side, analyst Anand James points to oversold oscillators that hint at a potential bottom. Yet the index has already breached its 13‑day reaction low, with support near 29,961 points and deeper floors around 28,800 and 27,200 if selling intensifies. Resistance sits near 30,300 for intraday moves and 31,300 for a close.
What It Means for the Broader Market
The IT sector makes up about a fifth of the NSE’s market cap, so a sustained rout could weigh on the Sensex and broader Nifty indices. If you’re tracking market breadth, you’ll see that the IT slide contributed to a wider correction, amplifying pressures from global rate hikes and domestic fiscal concerns.
Sector‑Level Perspectives
Senior technology consultant Ravi Prasad notes that AI is a double‑edged sword. “AI tools can boost productivity, but they also threaten the traditional billable‑hours model many Indian IT firms rely on,” he explains. Firms already integrating AI—think TCS’s AI‑ops platform or Infosys’ Edge AI suite—may navigate the shift better, while laggards could face sharper utilisation drops.
Looking Ahead: Risks and Opportunities
Analysts remain split. Some view the plunge as a contrarian entry point, betting that AI adoption will eventually open new revenue streams for agile firms. Others echo Naren’s caution, insisting that firms must demonstrate a clear roadmap to offset potential margin compression from AI‑enabled automation before investors can get comfortable.
In any case, the 21% slide underscores that technology cycles are no longer insulated from rapid innovation shocks. As AI continues to evolve, Indian IT companies will need to re‑engineer service models, invest in upskilling, and prove they can harness the technology without sacrificing the steady cash flows that have long underpinned the sector’s appeal.
For you as an investor, the takeaway is clear: the historic plunge signals a sector at a crossroads, where the next few quarters will decide whether AI becomes a catalyst for renewed growth or a harbinger of a longer‑term earnings drag.
