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After a brief rebound in the previous session, Indian IT stocks fell sharply on Wednesday; How long can the AI-led selloff persist?
Why are IT stocks falling today?
Indian IT Stocks Slide: After a brief rebound in the previous session, Indian IT stocks, including Infosys, TCS, Wipro, HCL Tech, and others, fell sharply on Wednesday, February 18, tracking weakness in US tech shares overnight. The Nifty IT index dropped 1.5% in intraday trade, with all its constituents in the red.
The technology sector is facing renewed pressure as AI-driven disruption accelerates, raising fears that rapid advances in artificial intelligence could undermine traditional IT services and pose challenges for Indian IT companies.
“AI will render much of legacy software and testing redundant. Just as hyperscalers initially created headwinds for infrastructure management services (IMS), and BPO was disrupted in the 2015 cycle,” noted Motilal Oswal Financial Services earlier this month.
Among individual stocks, Persistent Systems, Infosys, LTI Mindtree, Tech Mahindra, and Coforge fell more than 2%, while Mphasis, Wipro, L&T Tech, HCL Tech, and TCS dropped over 1% each. The Nifty IT index has now declined 21% over the past year and 17% in the last month.
Analyst Views
ICICI Direct said the IT sector is undergoing a structural transition driven by AI adoption, workforce rationalisation, productivity shifts, and valuation adjustments. Despite the recent correction, valuations are below long-term averages, making selective investment constructive. The brokerage recommends risk-neutral investors consider staggered investments via IT ETFs over the next few quarters, focusing on AI capabilities, digital services, and balance sheet strength.
UBS highlighted that current valuations imply terminal free cash flow (FCF) growth of 4–6%, down from 6–7% a month ago. The brokerage emphasised the need to decouple revenue growth from headcount growth, citing automation, evolving delivery models, and a growing share of fixed-price or outcome-based projects.
Stocks to Watch
Equirus Securities noted that the recent 12–18% decline in the NSE IT index and the top six large-cap IT stocks since February 3, 2026, reflects investor concerns over AI-led disruption. However, it maintained that the role of IT services and systems integrators is unlikely to disappear despite advancements by AI-first companies like Anthropic and Palantir.
The brokerage prefers Infosys, TCS, HCL Tech, and Tech Mahindra among large caps, Mphasis and Zensar Tech among midcaps, and KPIT within the ER&D segment. It cautioned that a higher-than-expected impact from AI remains the key downside risk.
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February 18, 2026, 10:10 IST
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