TCS to Infosys, Wipro: Indian IT stocks mirror decline in US tech shares - How long can the AI-led selloff persist?

By Admin

19 Feb, 2026

The Indian IT sector is once again under pressure. On February 18, shares of leading technology companies such as Tata Consultancy Services, Infosys, and Wipro declined sharply, tracking weakness in US technology stocks. The broader Nifty IT index slipped 1.5% in intra-day trade, with all its constituents trading in the red.

The fall underscores mounting concerns that rapid advances in artificial intelligence (AI) could significantly disrupt the traditional IT services model that has powered Indian technology giants for decades.

AI Disruption Fears Weigh on IT Stocks

The technology sector is witnessing renewed turbulence amid growing fears that AI could erode the relevance of legacy software services, testing functions, and headcount-based outsourcing models.

According to Motilal Oswal Financial Services, AI could render much of legacy software and testing redundant. The brokerage compared the current AI wave to earlier disruptions such as hyperscalers affecting infrastructure management services and the BPO shake-up seen around 2015.

Among individual stocks:

• Persistent Systems, Infosys, LTI Mindtree, Tech Mahindra, and Coforge fell over 2%.
  
  

• Mphasis, Wipro, L&T Technology Services, HCL Tech, and TCS declined over 1%.
  
  

The correction has been steep:

• The Nifty IT index is down 21% over the last year.
  
  

• It has fallen 17% in the past month alone.
  
  

Clearly, investors are recalibrating expectations as AI reshapes the industry landscape.

A Short-Lived Recovery

Interestingly, the sharp fall came after a brief rebound on February 17. Investors had stepped in to buy the dip after Indian equities saw a massive ₹4.86 lakh-crore erosion in market capitalisation over nine sessions beginning February 4.

Two key developments helped ease fears temporarily:

1. Infosys–Anthropic Collaboration

Infosys announced a strategic partnership with Anthropic to develop advanced enterprise AI solutions. The collaboration integrates Anthropic’s Claude models, including Claude Code, with Infosys’ Topaz AI offerings.

The partnership aims to:

• Automate complex workflows
  
  

• Accelerate software delivery
  
  

• Deploy AI within governance and transparency frameworks
  
  

• Serve sectors like telecom, financial services, manufacturing, and software development
  
  

This announcement initially signaled that Indian IT companies are adapting proactively rather than being displaced.

2. AI Summit 2026 Messaging

Broader messaging from AI Summit 2026 emphasized collaboration over displacement, suggesting AI adoption would augment rather than eliminate traditional IT services.

However, optimism proved short-lived. Concerns resurfaced that accelerated AI adoption could:

• Delay global client decision-making
  
  

• Slow near-term deal wins
  
  

• Impact revenue growth
  
  

• Pressure the headcount-based outsourcing model
  
  

Deal-flow commentary and large contract signings are now critical indicators for the coming quarters.

Market Experts: Caution Prevails

Near-Term Volatility Likely

VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, stated that volatility in IT stocks may continue in the near term due to persistent uncertainty.

He noted that large institutional investors may hesitate to invest heavily unless valuations become more compelling. Additionally, capital may rotate toward sectors such as:

• Banking and financials
  
  

• Automobiles
  
  

• Telecom
  
  

• Pharmaceuticals
  
  

These sectors currently offer stronger earnings visibility compared to IT.

Brokerage Views: Pain Now, Potential Later?

JM Financial: FY27 Could Be Better

JM Financial believes FY27 could outperform FY26, though sustaining margins will be challenging amid higher technology investments unless supported by currency movements.

The brokerage noted:

• NSE IT has underperformed significantly versus the Nifty.
  
  

• The sector is unlikely to re-rate if concerns about Gen AI’s impact on long-term growth persist.
  
  

• However, fears around terminal growth may be overly pessimistic.
  
  

• Rising free cash flow (FCF) yields could offer near-term support.
  
  

Their stock preferences include:

• Infosys among large caps
  
  

• Mphasis among mid-tier IT firms
  
  

• Sagility in the BPO segment
  
  

Motilal Oswal: Concerns May Be Excessive

Motilal Oswal Financial Services argues that AI-led disruption fears may be overstated. While long-term structural questions remain, medium-term AI adoption is expected to be revenue-accretive.

Rising free cash flow yields could also provide a valuation cushion.

How Long Can the AI-Led Selloff Persist?

The answer depends on three major factors:

1. Deal Momentum

If companies report strong deal wins and stable pipelines, sentiment could recover.

2. AI Monetisation

Investors need proof that AI is driving incremental revenue rather than cannibalizing existing business.

3. Global Tech Sentiment

Indian IT stocks closely track US tech movements. Continued weakness in US markets could prolong the correction.

In the near term, volatility is likely to persist. However, structurally strong balance sheets, high cash flows, and adaptability to new technologies may prevent a prolonged structural decline.

Conclusion

Indian IT stocks are navigating a pivotal transition phase. While AI poses undeniable disruption risks, it also opens up new growth avenues. The market is currently pricing in worst-case scenarios, but history shows that the Indian IT industry has successfully reinvented itself through multiple technological cycles.

Whether this is another temporary correction or a deeper structural reset will depend on how effectively companies convert AI from a threat into an opportunity.

Disclaimer: The views and recommendations mentioned above are those of individual analysts or broking companies and do not represent investment advice. Investors are advised to consult certified financial experts before making any investment decisions.