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Nifty IT index fall: India’s NIFTY IT index has come under intense pressure in recent sessions, emerging as one of the worst-performing sectoral gauges amid mounting concerns over artificial intelligence disruption and a shifting global rate outlook.
The IT index has delivered negative returns across timeframes:
| Timeframe | Change |
| 1 Week | -8.35% |
| 1 Month | -16.24% |
| 3 Months | - 10.00% |
| 6 Months | -6.01% |
| 1 Year | -20.29% |
With the index at 32,738.05 (as of February 16), it now stands approximately 19.96 per cent below its 52-week high of 40,905.40, while remaining above its 52-week low of 30,918.95. The broader correction from peak levels is nearing 30 per cent, aligning closely with historical correction averages for the sector.
What’s driving the selloff?
The latest leg of decline is being attributed to two key factors:
Investors are increasingly factoring in structural risks posed by AI tools and automation. Concerns are rising that AI-led platforms could disrupt traditional application development, testing, and maintenance services, long-standing revenue drivers for Indian IT firms.
2. US Rate Outlook
Stronger-than-expected US job growth in January and an unemployment rate easing to 4.3 per cent have strengthened expectations that the Federal Reserve may keep interest rates higher for longer. Persistent labour market resilience complicates the inflation outlook, weighing on rate-sensitive technology stocks globally, including Indian IT.
Brokerage Views on IT Sector
UBS on IT Sectors
UBS says markets are pricing in structurally lower terminal growth for the IT sector, implying 3–5 per cent revenue growth for large caps and 6–9 per cent for midcaps.
The brokerage also flags AI agents as a structural risk to the traditional staff-augmentation model, as revenue growth begins decoupling from headcount expansion. While time-and-material contracts still form over 50 per cent of revenues, the transition toward automation and outcome-based pricing is early.
UBS believes near-term reaction may be overdone, but acknowledges the structural shift toward AI-led platforms is real.
Citi on IT Sector
Citi notes that Nifty IT valuations are nearing 15-year averages, even as Indian IT trades at a multi-year premium to global peers.
According to Citi, TCS and Infosys are valued at nearly 18x earnings despite mid-single digit growth visibility, with reverse Discounted Cash Flow (DCF) implying around 4 per cent terminal growth.
Citi warns that datacenter capex and M&A may weigh on actual free cash flow. It remains cautious, flagging AI disruption, GCC expansion, and competition risks, while preferring Infosys and HCLTech among large caps.
IT Sector Outlook
ICICI Direct believes the IT sector is undergoing a structural transition heading into 2026, driven by rapid AI adoption, workforce rationalisation, productivity realignment, and a broader valuation reset.
The brokerage notes that sector valuations have moderated and are now below long-term averages.
While near-term challenges persist, ICICI Direct remains selectively constructive, advising to focus on companies strengthening AI capabilities, scaling digital services, and maintaining strong balance sheets to navigate the ongoing transformation.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
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