Nifty IT slumps nearly 4% as AI disruption fears deepen; Jefferies warns of more pain ahead

The sharp selloff in IT stocks intensified on Tuesday, dragging the Nifty IT index down nearly 4 per cent in intraday trade and extending its steep decline of over 20 per cent for February.

Fresh concerns around AI‑driven disruption continued to weigh on the sector, with Jefferies cautioning that the risks from artificial intelligence still overshadow near‑term earnings visibility.

The brokerage cut earnings estimates by up to 4 per cent and slashed price targets by as much as 33 per cent, noting that the shift from managed services to AI‑led consulting could squeeze revenues for large-cap IT companies.

Jefferies added that the current downturn may not be over, advising investors to stay selective and favour mid-sized firms that can adapt faster to emerging AI opportunities.

The continued selloff in IT stocks weighed on the overall market sentiment on Tuesday. Nifty IT has witnessed persistent weakness across multiple timeframes, posting negative returns almost throughout. It declined 8.11 per cent over the past week and 20.52 per cent in the last month, while the three‑month and six‑month returns stand at a negative 17.94 per cent and 14.25 per cent, respectively. Year‑to‑date performance remains subdued with a 20.38 per cent drop, and the one‑year return is also negative at 22.95 per cent drop. Even on a three‑year basis, the stock is marginally lower at 0.40 per cent, with only the five‑year period showing positive gains of 22.65 per cent.

Downgraded from 'Buy' to 'Hold'

Downgraded from 'Hold' to 'Underperform'