IT Stocks Slide as Nifty IT Falls Nearly 2.5%, Erasing Previous Session Gains

Indian shares sank on Thursday, dragged by HDFC Bank after its part-time chairman resigned, while surging crude prices and a hawkish Federal Reserve weighed on global sentiment.

The Nifty 50 was down 2.24% at 23,245.45, while the BSE Sensex lost 2.33% to 74,906.91, as of 9:55 a.m. IST.

Nifty IT Snaps Six-Day Losing Streak

On Wednesday, the Nifty IT index stood out as the top-performing sector, rebounding sharply after six consecutive sessions of decline. Among the top gainers were Coforge, Oracle Financial Services Software, Persistent Systems, and Infosys, each rising more than 4%. Other major players such as Wipro, LTIMindtree, TCS, HCL Tech, Tech Mahindra, and Mphasis gained between 2.68% and 3.96%.

The magnitude of the move was significant, as the Nifty IT index recorded its sharpest single-day gain in 10 months. The last comparable rally occurred in May, when the index surged 6.70% in a single session.

February Sell-Off: Worst Since 2008

The sharp rebound comes after a steep correction in February, when the IT index declined nearly 20%, marking its worst monthly fall since September 2008.

The sell-off was triggered by rising concerns around artificial intelligence disruption, particularly the emergence of agentic AI coding tools. Investors feared that such technologies could automate core services like coding, testing, analytics, and workflow execution—areas central to the traditional labour-intensive outsourcing model of Indian IT firms.

This raised serious concerns about pricing pressure, margin compression, employee utilisation, and the long-term relevance of entry-level roles across large IT companies.

AI Concerns Deepen After New Launches

Investor anxiety intensified following the launch of advanced AI agents by Anthropic. These developments highlighted the rapid evolution of automation capabilities and increased fears that disruption could arrive sooner than expected, especially in process-driven service segments.

As a result, IT stocks witnessed heavy selling, with investors reassessing growth assumptions and valuation multiples in light of the emerging technological shift.

What Triggered the March 18 Rally?

Sentiment turned positive after a report indicated that Indian IT companies attempted to reassure investors, stating that AI-related concerns may be overstated. Companies acknowledged that while artificial intelligence would bring structural changes, it would also create new opportunities.

This narrative helped restore confidence, leading to renewed buying interest across IT stocks.

Global Factors Remain Crucial

Despite the domestic recovery, Indian IT stocks continue to be closely linked to global developments, particularly in the United States, which contributes a significant portion of sector revenues.

However, concerns persist that the US-Israeli conflict involving Iran could keep inflation elevated, potentially delaying monetary easing.

Interest rates, global business confidence, and macroeconomic stability remain critical factors influencing IT spending in key markets.

Relief Rally, But Uncertainty Persists

The sharp rebound in IT stocks reflects a relief rally driven by improved valuations and easing sentiment around AI concerns. However, the broader debate is far from over.

Artificial intelligence will remain a defining factor for the sector. Investors will closely track how Indian IT firms adapt their business models, protect margins, and reposition themselves in an evolving technological landscape.

For now, the market appears to acknowledge that the recent correction was excessive, and Wednesday’s rally represents a recalibration of expectations rather than a complete shift in the long-term outlook.