The Indian technology sector is facing a turbulent start to the year, with major stocks witnessing a relentless downward spiral. In early trade on Thursday, February 12, the Nifty IT index continued its decline, marking a significant erosion of investor wealth. Data reveals that the index has already slid over 10.5% year-to-date in 2026, reflecting deep-seated anxieties about the future of traditional software services.
Global tech rout ripples through Dalal Street
This domestic sell-off follows a volatile session on Wall Street, where software stocks faced renewed pressure. Established players like Salesforce and ServiceNow saw substantial drops, with the broader tech-software sector slipping into bear market territory. The weakness in US markets often dictates the movement of Indian IT shares, as these companies rely heavily on North American clients for their primary revenue streams.
Why the Nifty IT index is under pressure
Investors are increasingly worried about the rise of specialized AI startups. These agile companies are launching tools that automate complex professional tasks, potentially bypassing the need for large-scale IT outsourcing. For instance, the recent launch of AI platforms targeting tax planning and legal documentation has sent shockwaves through the financial and professional services industry.
TCS and Infosys hit new lows
The carnage was evident across individual stock performances. Tata Consultancy Services (TCS) saw its shares hit a fresh 52-week low of ₹2,797.30 during the morning session. Meanwhile, Infosys and Persistent Systems were among the top laggards, dropping over 4%. The broad-based nature of the decline suggests that the market is recalibrating valuations for the entire sector rather than punishing specific companies.
Nasscom defends the Indian IT model
Despite the market pessimism, the industry body Nasscom has urged for a more measured perspective. In a recent statement, Nasscom dismissed fears that advanced AI would render Indian IT firms obsolete. The body argued that while AI will automate certain functions, it will also create a massive demand for “orchestrators” who can integrate these complex tools into existing enterprise systems.
Human-led coordination remains critical
According to Nasscom, AI is rarely an “out-of-the-box” solution for global enterprises. Large corporations operate in fragmented data environments that require careful human intervention. Indian tech firms are currently reinventing themselves to build AI-ready data foundations and deploy intelligent agents. This shift from simple labor arbitrage to high-end consulting could potentially provide a new growth lever for the industry.
Earnings guidance adds to the gloom
Market sentiment was further dampened by weak guidance from global technology leaders. Cisco Systems recently issued a cautious outlook for the current quarter, leading to a sharp drop in its stock price during extended trading. Such signals from global peers often lead Indian investors to expect a slowdown in discretionary spending by international clients, directly impacting the order books of local firms.
Sectoral outlook: Experimentation to deployment
The transition from AI experimentation to large-scale deployment is the next major hurdle. While Indian IT firms are well-positioned to handle this transition, the market remains skeptical about how these firms will protect their profit margins. As automated agents take over repetitive tasks, the traditional billing model based on headcount is under scrutiny, forcing companies to explore value-based pricing strategies.
Summary of morning trade on February 12
By mid-morning, the Nifty IT index was trading 3.59% lower, with all 12 of its constituents in the red. Coforge emerged as the top loser, closely followed by LTIMindtree. The consistent selling pressure across the board indicates that institutional investors may be reducing their exposure to the sector until more clarity emerges regarding the impact of AI on quarterly earnings.
Investor caution prevails
For now, the narrative remains focused on disruption rather than evolution. While long-term players may see this as a valuation correction, the immediate trend is dictated by global macro cues and the rapid pace of technological advancements. Traders are advised to keep a close watch on US job data and upcoming quarterly results to gauge if the current sell-off has bottomed out.
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