Nifty IT Stocks: 2026 Slump, Valuation and SIP Cues

Nifty IT’s selloff keeps the buy-or-wait debate alive

Nifty IT stocks have lagged the broader market in 2026, pushing investors back to a familiar question: is this a value entry or a warning sign to stay away. The Nifty IT index is down 28.71% year-to-date, a much steeper fall than the Nifty 50’s 8.32% decline over the same period. At the same time, the sector has shown short-term strength, rising 7.13% in the last one month versus a 1.74% gain in the Nifty 50. That mix of deep underperformance and a quick rebound has created conflicting signals for retail investors.

The immediate concern is whether the recent bounce marks a turning point or is simply a counter-trend move. Analysts cited in the report do not see the rebound as a confirmed, durable recovery yet. They point to uncertainty in global technology spending, delayed client decisions, and geopolitical tensions as ongoing headwinds. Another structural question is how rapidly AI changes pricing and delivery models for traditional IT services.

How the underperformance has played out in 2026

The sector’s drawdown has been sharp enough to stand out even in a weak market. In 2026 so far, Nifty IT has fallen 28.71%, while the Nifty 50 is down 8.32%. Over six months, the Nifty IT index is described as having broken nearly 30%, reinforcing the point that the correction is not limited to a brief period.

Despite that, the last month has been comparatively better for IT, with the Nifty IT index up 7.13%. This outperformance against the Nifty 50’s 1.74% rise suggests bargain-hunting or short covering has played a role. But experts quoted in the report emphasise that a strong month does not, by itself, settle the bigger debate on earnings visibility and AI-led disruption.

The trigger events investors are tracking

A sharp risk-off move was also visible when the Nifty IT index slumped over 6% to a three-year low, after Accenture cut guidance and flagged weaker bookings in its managed services division. The report linked this to a broad sell-off across frontline Indian IT names. Infosys led declines, falling nearly 9%, while TCS, Mphasis, LTI Mindtree, Tech Mahindra, Persistent Systems, and HCL Tech dropped 4-6%.

The index also plunged to 26,634.50 on a Friday session, described as the lowest level since April 2023. Separately, another bout of weakness was tied to worries about AI disruption after OpenAI’s latest announcement, with the Nifty IT index falling 3.7% on Tuesday to its lowest level since May 2023. These episodes matter because they show how quickly global cues and AI narratives can swing sentiment in an already volatile sector.

What valuations are signalling after the correction

Some fund managers and strategists argue the selloff has pushed valuations to unusually low levels versus history. One report noted the Nifty IT index trading at a price-to-earnings (P/E) multiple of 20.6 times, below its five-year average of 29.16 and ten-year average of 24.4, and the lowest valuation for the sector since July 2020. It also flagged that the sector’s weight in the Nifty has fallen to an all-time low of 8.85%.

Another expert view added that, after a roughly 32% fall in 2026, the index trades near 19x earnings, below historical averages. This was described as a contrarian “value-zone” idea, but not suited to investors seeking quick gains. Alongside valuation, the report cited a dividend yield of 3.5% and an earnings yield of 5% as part of the case for taking measured exposure.

Technical levels and market structure cues

From a trading perspective, one analyst highlighted bearish technical signals after the index broke below its previous swing low of 27,078 recorded on May 14. The same note said the index’s RSI slipped below 40, indicating rising bearish momentum. It also said DI- crossed above DI+ on the ADX indicator, signalling seller dominance.

A resistance zone of 27,450 to 27,500 was flagged as key. As long as the index stays below this zone, the trend was described as likely to remain bearish. For investors, these levels matter less as forecasts and more as markers of where supply has been showing up.

What experts are advising retail investors to do

The expert opinions in the report converge on one point: Nifty IT Index Funds should not be treated as a core portfolio holding. Beyond that, views differ on timing and risk appetite.

Nirali Bhansali, Equity Fund Manager at Samco Mutual Fund, urged caution, citing significant structural change as AI begins to challenge some traditional revenue streams for IT companies. Nishchal Jain, Quant Researcher at Share.Market by PhonePe, argued that the correction can be a long-term accumulation opportunity, but recommended avoiding lump-sum bets due to cyclicality and volatility. He suggested using Systematic Investment Plans (SIPs) to average near-term fluctuations.

Gaurav Arora, Head of Research at Sahi, also framed it as a tactical, satellite allocation rather than a core holding, preferably via SIPs and sized small for investors with a 3-5 year horizon. Another view quoted, attributed to Dasani, described traditional IT services as increasingly a “sunset business” in its current form, with selective interest in AI-native and hyperscaler-aligned firms. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, differed, noting buying interest can emerge at lower levels as valuations become attractive after a sharp correction.

Key numbers at a glance

Market impact: what this means for investors

The immediate market impact is higher volatility and faster sector rotations, as investors react to global cues like Accenture’s guidance and to AI-related headlines. Sharp single-day moves in large-cap IT names can also drag broader indices lower, as described when heavy selling in IT ended a five-day rally in benchmarks. For retail investors, the sector’s cyclicality raises the cost of wrong timing, especially with lump-sum allocations.

From an asset-allocation angle, the message in the report is consistent: treat IT exposure as tactical, use SIPs if investing, and match the decision to horizon and risk tolerance. Investors seeking short-term returns or lower volatility were advised to wait for clearer signs on AI-led growth and technology spending.

Why the story matters now

The correction has reopened a structural debate rather than a purely cyclical one. The sector is dealing with concerns around slowing global spending, weaker discretionary demand, and a shift in delivery models as clients test AI-led deployments. Even analysts who see value in lower multiples still frame the opportunity as one that requires patience and the ability to withstand further drawdowns.

Conclusion

Nifty IT’s 2026 drawdown of 28.71%, combined with a 7.13% one-month rebound, captures the sector’s current push and pull between valuation comfort and business-model uncertainty. Experts quoted in the report largely prefer SIP-based accumulation for 3-5 year investors, while urging others to stay cautious until there is more clarity on AI-led growth and tech spending trends.