Last Updated:February 13, 2026, 10:28 IST

The Nifty IT index plunges nearly 5% in early trade on February 13, with heavyweights such as Infosys, Tata Consultancy Services, Wipro and HCLTech leading the fall.

Know Why IT Are Stocks Falling.

Why Are IT Stocks Falling? Indian IT stocks extended their sharp decline for a second straight session on Friday, tracking global weakness in technology shares and mounting concerns that rapid advances in artificial intelligence could disrupt the traditional business models of software exporters.

The Nifty IT index plunged nearly 5% in early trade on February 13, with heavyweights such as Infosys, Tata Consultancy Services, Wipro and HCLTech leading the fall. The sell-off mirrored weakness in US technology stocks overnight, where Apple dropped nearly 5%, Meta fell 2.82%, Nvidia declined 1.61% and Tesla slipped 2.69%. American Depository Receipts of Indian IT firms, including Infosys and Wipro, also slid as much as 9%, signalling negative sentiment ahead of domestic trading.

On the day, Infosys tumbled 6.2%, TCS fell 4.84% to a fresh 52-week low of ₹2,620, HCLTech declined 4.85% and Wipro lost 3.7%. Mid-cap names also saw broad-based selling: Persistent Systems dropped 3%, Coforge fell 5.32%, KPIT Technologies slumped nearly 8%, and Tech Mahindra declined 3.55%.

Why Are IT Stocks Falling?

Market participants say the sector is facing a rare combination of structural disruption and macroeconomic headwinds.

Agentic AI fears: The launch of advanced artificial intelligence systems capable of executing entire workflows — not just assisting coders — has intensified concerns about “seat compression”, or reduced staffing needs. Since Indian IT firms traditionally earn revenue based on billing hours and manpower, automation threatens the very foundation of their pricing model. Recently, Anthropic’s Claud Cowork sent shockwaves to the global IT industry. A new tool from AI company Algorhythm Holdings has also made trucking companies the latest victim of the market’s AI jitters.

Billing model transition: According to analysts, clients might move from time-and-material contracts to outcome-based pricing. While this could improve efficiency in the long term, markets worry that the transition phase may temporarily dent revenues as tech companies recalibrate pricing structures.

Valuation correction: After a strong rally in late 2025 driven by AI optimism, many IT stocks were trading at elevated valuations. The current risk-off environment is triggering profit-booking, especially in companies lacking a clear near-term AI monetisation roadmap.

Global tech layoffs: More than 80,000 tech employees were reportedly laid off globally in the first 40 days of 2026, including at large firms such as Amazon and Salesforce. Investors see this not as routine cost-cutting but as a structural shift toward automation and AI-driven efficiency.

What Analysts Are Saying

Strategists at JPMorgan said in a recent note that the sharp correction in software stocks may be excessive and driven more by fear than by actual deterioration in business fundamentals. According to the brokerage, markets appear to be pricing in AI-led disruption at unrealistic levels, which could create room for a rebound.

Vinod Nair, Head of Research at Geojit Investments, said AI is triggering a structural transformation in Indian IT services by compressing timelines and automating routine tasks. “Layoffs are likely in routine-heavy areas as fewer people will be needed to deliver the same outcomes. Clients are shifting toward outcome-based pricing, and in the coming quarters AI adoption could create headwinds for deal wins, potentially impacting topline. Monitoring deal flow will be critical,” he said.

Kenneth Andrade, CIO at Old Bridge Mutual Fund, noted that sector-wide profit surges are unlikely going forward. Growth is becoming company-specific as market share shifts and structural challenges reshape valuations. “It’s no longer a broad play — only a select company or two truly makes sense in this climate,” he said.

What Should Investors Do Now?

Market strategists say selectivity is key. JPMorgan’s strategy team believes the risk-reward balance is gradually tilting toward recovery, given bearish positioning and still-solid fundamentals. They recommend increasing exposure to high-quality software companies that are better positioned to adapt to AI-driven changes.

For investors, the message is clear: the sector is undergoing a structural transition rather than a cyclical slowdown. Near-term volatility may persist, but long-term winners are likely to be firms that successfully pivot from manpower-driven outsourcing to AI-enabled, outcome-focused technology services.

Not the First Time the Tech Sector Has Faced Disruption Fears

The IT industry has historically gone through phases of panic during technological transitions.

Y2K era (late 1990s): Fears that computer systems would crash at the turn of the millennium triggered massive global spending to fix legacy code. While markets were volatile, the demand surge ultimately helped Indian IT firms scale globally and build their reputation.

Outsourcing wave (mid-2000s): Western economies feared job losses to low-cost destinations such as India and the Philippines. Although it caused short-term disruptions and wage pressure, outsourcing ended up expanding the global tech ecosystem and creating new categories of jobs.

Both episodes show that technological shifts often cause short-term market pain but can expand the industry’s long-term opportunity set.

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