The Indian equity markets witnessed a sharp correction on February 12, with the technology sector bearing the maximum brunt. The Nifty IT index emerged as the top sectoral loser, tumbling more than 4% in early trade. This massive sell-off wiped out billions in market valuation as investors reacted to a combination of global macroeconomic shifts and intensifying fears regarding Artificial Intelligence.
Heavyweights drag the Nifty IT index
The decline was widespread across the sector, leaving no major player unscathed. Shares of Infosys and Coforge led the downward spiral, plunging nearly 5% each. For Infosys, this marks a significant low, reaching levels not seen since April of last year. Other industry leaders like TCS, Tech Mahindra, Mphasis, and LTI Mindtree also saw their stock prices erode by more than 4%.
Even the relatively resilient players like HCL Technologies and Wipro could not withstand the pressure, falling over 3%. This collective decline pushed the Nifty IT index to 33,588.80, reflecting deep-seated anxiety among institutional and retail investors alike.
The US Jobs Report: A double-edged sword
A primary catalyst for the current market volatility is the latest employment data from the United States. January’s job growth figures unexpectedly surged, with the unemployment rate dropping to 4.3%. While a stable labor market usually signals economic health, it has created a dilemma for the Federal Reserve.
Investors now worry that this labor market strength gives the Fed enough room to keep interest rates higher for a longer duration. Historically, Indian IT companies, which derive a massive chunk of their revenue from US clients, struggle in high-interest-rate environments as corporate spending on discretionary tech projects tends to dry up.
The “Empty” growth concern
Economists have pointed out a worrying trend within the US jobs data. Most of the employment gains were concentrated in the healthcare and social assistance sectors. Christopher Rupkey, chief economist at FWDBONDS, noted that these gains do not necessarily guarantee future economic success across other sectors.
For the IT industry, the lack of job growth in the corporate and professional services segments is a red flag. If American enterprises are not hiring in tech-heavy departments, it suggests a “tepid” demand for the very services that Indian IT firms provide.
AI disruption: From hype to headache
Beyond the macroeconomic data, there is a structural fear haunting the software services industry: Artificial Intelligence. After a 13% decline in 2025, the IT index has already lost 11% in 2026. The narrative has shifted from AI being a “growth driver” to AI being a “disruptor” that could cannibalize traditional business models.
The recent launch of a legal AI tool by Anthropic has heightened these concerns. Anthropic’s “Claude Cowork” agent can now automate complex tasks in legal, sales, and marketing—sectors that were previously reliant on human-led professional services.
Impact on labor-heavy business models
Market analysts believe the era of massive billable hours might be under threat. Vinit Bolinjkar, head of research at Ventura Securities, described the current market movement as a “mix of knee-jerk reaction and concerns over real threats.”
The core issue is that Indian IT firms have traditionally operated on labor-heavy models. As AI automation begins to handle data analysis and coding tasks, the requirement for a large workforce diminishes. This could lead to a significant reduction in headcount and, consequently, lower revenues for firms that charge based on the number of employees assigned to a project.
Global tech giants feel the heat
The sentiment in India mirrors a broader global trend. On Wall Street, tech behemoths are also facing selling pressure. Microsoft and Alphabet (Google’s parent company) recently saw their shares decline by over 2%, dragging down the S&P 500 software index.
When global giants with massive R&D budgets face uncertainty, the ripple effects are felt instantly in Mumbai and Bengaluru. Investors are currently recalibrating the “fair value” of IT stocks, moving away from high growth multiples toward a more cautious valuation.
What lies ahead for investors?
The immediate outlook for IT stocks remains clouded by volatility. While some experts view this as a necessary correction, others warn of further downside if earnings reports do not show a clear path to AI integration.
The sector is currently caught between the “old world” of traditional outsourcing and the “new world” of AI-led automation. Until there is more clarity on how Indian firms will protect their margins in this transition, the pressure on share prices is likely to persist.
Based on available market data and analyst reports as of February 12, 2026.
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