India’s information technology sector experienced a sharp sell-off on February 4, 2026, as equity markets reacted to fears that rapid advances in artificial intelligence could undermine traditional services revenue models. The Nifty IT index fell more than 6 percent during the session, extending volatility in the broader technology segment, affecting various Stocks.
Major Indian IT stocks, including large caps reliant on global outsourcing contracts, saw significant declines. Tata Consultancy Services, Infosys, Wipro, HCL Technologies, and Tech Mahindra were among the firms that recorded sharp drops in their share prices. The sell-off came as investors reassessed the impact of emerging AI-driven tools that automate tasks historically performed by human labour, notably affecting IT Stocks.
“The market is beginning to price in structural shifts driven by AI,” said Amar Joshi, head of equities at a Mumbai-based asset management firm. “Clients are exploring automation across coding, testing, and back-office functions, and investors are grappling with how that could reshape revenues and margins for traditional IT services, leading to a reassessment of their Stocks.”
The latest wave of selling followed international news of new AI productivity tools designed to streamline complex business operations. While these tools have not yet materially displaced service contracts, markets interpreted the developments as a signal that future demand patterns could shift, particularly in labour-intensive segments of the IT industry.
“Investors are recalibrating risk in a sector that has been viewed as relatively stable for decades,” said Leena Kapoor, technology equity analyst. “AI is no longer a theoretical disruptor; it is being integrated into workflows in ways that could compress service volumes over time.”
The Nifty IT tumble occurred amid broader market gains in other sectors, highlighting a divergence between technology and traditional growth drivers in India’s equity markets. Although overall domestic benchmark indices posted modest advances, the tech segment dampened broader investor sentiment as traders weighed near-term disruption risks against longer-term growth potential.
Some fund managers said that valuation concerns had been building in the IT pack in recent sessions, even before the AI-related news. “Pricing for many IT stocks reflected strong earnings momentum and offshore demand,” said Rahul Mehta, chief investment officer at a Delhi boutique fund. “The swift re-rating shows how sensitive the space has become to technological inflection points.”
Global trends in equity markets offer context for the Indian technology sell-off. Many major international indices have recently priced in AI-related disruption across traditional service industries, leading to sector rotation and selective portfolio reweighting.
Market participants said that volatility may persist as investors seek clarity on how Indian IT firms plan to adapt their business models. Companies with defined AI integration strategies and higher exposure to digital transformation projects could prove more resilient over time.
Looking ahead, analysts said that managing the transition toward higher-value, AI-augmented services will be critical for Indian IT firms to sustain growth trajectories and investor confidence.
