Nifty IT sinks 6% as AI fears spark tech sell-off

What triggered the sudden fall in IT stocks

Indian IT stocks sold off sharply on February 4, 2026, as global tech weakness spilled into domestic trading. Shares of large IT services companies such as Infosys, TCS, HCLTech, Tech Mahindra, and Wipro fell in tandem, signalling sector-wide risk reduction rather than a single-company issue. The move followed an overnight decline in the tech-heavy Nasdaq index, as technology and software stocks turned weak globally. Reports linked the global sell-off to investor reaction to Anthropic’s latest artificial intelligence offerings. The renewed focus on AI tools that could threaten business models across software, legal, and data companies added to the pressure.

The selling also exposed how sensitive Indian IT stocks remain to global tech sentiment because a large part of sector revenue comes from overseas clients. Traders pointed to a risk-off mood that typically hits export-linked sectors first when global tech corrects. As the session progressed, mid-tier IT names also came under sharper pressure, with declines in the 4% to 7% range in some cases as stop-loss orders were triggered.

Nifty IT among the worst performers

The NIFTY IT index dropped as much as 6.35% to an intraday low of 36,160.20, and all 10 constituents were trading lower at one point. Persistent Systems led the declines with a fall of over 6.5% during the session. LTI Mindtree, Coforge, Infosys, HCL Technologies, Mphasis and Tata Consultancy Services fell in a 5% to 8% range.

Selling pressure extended beyond large caps. The NIFTY MIDSMALL IT & TELECOM index fell 3.56%, with 16 out of 20 stocks in the index trading lower. Hexaware Technologies fell 5%, while Sonata Software, Birlasoft, Oracle Financial Services, Zensar Technologies, KPIT Technologies and Cyient declined between 2.5% and 5%.

How much did Infosys, TCS, Wipro, and peers fall

During the session, large-cap IT names posted steep losses. Around 1:20 pm, Infosys shares were down over 8%, TCS was down 7%, and HCLTech and Tech Mahindra fell as much as 6%. Wipro slid around 5%.

Infosys recorded one of its sharpest single-day moves in years. The stock fell as much as 7.3% to an intraday low of ₹1,534 on the NSE, noted as its biggest single-day fall since July 21, 2023. It also fell as much as 8.38% to an intraday low of ₹1,517, described as its biggest single-day fall since March 16, 2020.

Market capitalisation hit: Infosys at the day’s low

The sell-off hit market value materially. At the day’s lowest level, Infosys market capitalisation was reported at ₹621,000 crore after a drop of ₹49,000 crore. In another update tied to the deeper intraday fall, its market capitalisation was reported at ₹615,000 crore after a drop of ₹56,000 crore.

These figures underline the speed at which sentiment shifted from earlier optimism in the week. The same sector had seen a brief Budget rally earlier due to tax incentives for data centers, but that sentiment faded quickly as global and AI-linked concerns resurfaced.

Why AI is unsettling the outsourcing narrative

A key worry in this move was not only the immediate global tech correction but the medium-term question of how AI changes traditional outsourcing work. Investors flagged uncertainty around how quickly companies might adopt AI for back-end processes, potentially reducing demand for lower-end outsourced services. This anxiety comes at a time when deal ramp-ups have been slow and discretionary spending has been shrinking, alongside cautious commentary from clients in the US and Europe.

Pranay Aggarwal, Director and CEO of Stoxkart, said the slide reflects “the market finally pricing in the twin hit of weak global tech sentiment and domestic macro pressures.” He also pointed to concerns around AI automating low-end outsourced work and added that a stronger rupee has squeezed margin expectations for companies billing in dollars. According to him, the sell-off looked more sentiment-driven than structural, but it revealed fragile confidence in the traditional outsourcing model.

The US cue: Nasdaq drops as tech mood turns risk-off

Overnight in the US, the Nasdaq index fell 1.43% as investors reacted to developments around Anthropic’s new AI products, reports suggested. That decline set the tone for a broader risk-off trade. Indian IT stocks often react quickly to these cues because of their dependence on overseas demand and their positioning as global tech proxies for many investors.

In this case, the global correction came on top of already elevated valuations in Indian IT, which had remained high despite slow deal ramp-ups and cautious demand signals. The result was a quick unwind of positions as investors moved to reduce exposure.

A volatile sector: recent triggers beyond February 4

The IT pack has shown sharp swings even in recent months, reflecting how quickly narratives change. On December 26, IT stocks also came under pressure after Infosys announced a hike in entry-level salaries for fresh graduates. That move revived investor concerns around cost structures, and the Nifty IT index fell 0.86% to 38,638.80, extending losses for a third consecutive session.

On the other side, Infosys had also seen strong positive reaction around earnings. On January 16, Infosys shares rose around 4% in early trade after it reported Q3 FY26 results and raised FY26 constant-currency revenue growth guidance to 3% to 3.5% from 2% to 3%, while maintaining EBIT margin guidance at 20% to 22%. Its ADRs surged nearly 10% overnight around that time.

Key numbers investors tracked

What investors want clarity on next

The sector is likely to remain volatile in the near term. Investors are watching three specific variables: the pace of global tech spending, how quickly AI changes enterprise workflows, and whether Indian IT companies can sustain deal momentum. Client commentary from the US and Europe, the trajectory of discretionary spending, and currency moves such as rupee strength are also key inputs for margin expectations.

At the same time, companies continue to invest in cloud, automation, and AI-driven services, and the longer-term positioning is still being built around these themes. The immediate challenge is to reassure markets that growth plans remain intact even as business models evolve.

Conclusion

The February 4 sell-off showed how quickly global tech cues and AI-related disruption fears can drive sector-wide moves in Indian IT. With valuations, margins, and deal momentum under scrutiny, trading is likely to stay sensitive to global tech sentiment and company commentary in the near term.