India’s technology sector faced a brutal sell-off on Tuesday, February 24, 2026, as the NIFTY IT index hit a fresh 52-week low. Heavyweights including Tata Consultancy Services (TCS), Infosys, and HCLTech saw their share prices tumble significantly, contributing to a massive one-month decline of approximately 21%. This sharp correction has wiped out over ₹5 lakh crore in market capitalization since the start of February, leaving investors on edge as the sector struggles to find a stable floor amidst a “perfect storm” of negative global triggers.
The primary driver behind this exodus is a growing anxiety over artificial intelligence (AI) and its potential to disrupt the traditional outsourcing model. Sentiment soured further following recent announcements from AI firm Anthropic regarding new tools capable of automating complex tasks, such as modernizing legacy COBOL systems. These developments have reignited fears that the routine coding and maintenance work that forms the backbone of Indian IT revenues could be rapidly automated, leading to what some analysts describe as a “deflationary risk” to the industry’s long-term growth.
Compounding these technological fears is the heightened geopolitical uncertainty stemming from U.S. trade policies. With President Donald Trump’s administration recently raising global baseline tariffs to 15%, investors are concerned about a slowdown in discretionary spending by American clients. Since the U.S. remains the largest market for Indian software services, any disruption in trade or a move toward protectionism directly threatens the deal flow and profitability of these tech giants.
As a result, foreign institutional investors (FIIs) have been aggressively pulling capital out of the IT sector, even as they remain net buyers in other parts of the Indian economy like financials and capital goods. While some market experts suggest that the current sell-off may be an overreaction—noting that Indian firms have successfully pivoted through previous tech shifts—major global brokerages have nonetheless slashed their target prices. For now, the market remains in a “wait-and-watch” mode, looking for signs that these IT leaders can successfully reinvent themselves as AI orchestrators rather than just service providers.
