Nifty IT drops to 3-year low as Fed, AI fears grow

What happened in the Nifty IT trade

Indian IT stocks came under sharp selling pressure, pushing the Nifty IT index down more than 2% and near a three-year low, even as the broader market traded close to flat. In early trade, the index was down 2.33%, making it the worst-performing sectoral index at that point. The weakness was broad, with heavyweights dominating the Nifty’s top losers list. Wipro led the declines, while other large constituents including Infosys, HCL Technologies, TCS and Tech Mahindra also fell.

The move stood out because it reflected sector-specific stress rather than a market-wide risk-off move in that session. Later in the broader set of updates, the selling intensified on another day, with the Nifty IT index reported down 4.59% (1,520 points) to 31,639 at 9:50 am. In Friday’s intra-day trade in a separate update, the index was also cited down 5.24% to 31,422.60 on the NSE.

The biggest losers: Wipro, Infosys, TCS and peers

Large-cap IT names were consistently listed among the day’s key laggards. Wipro fell over 3% in early trade in one update, emerging as the top Nifty loser at that time. Infosys dropped around 2.2%, while HCL Technologies declined about 2.1%. TCS slipped nearly 1.8%, and Tech Mahindra was down over 1.2%, putting all five majors among the top losers.

In another session snapshot at 9:50 am, Infosys fell 6.13% to 1,299 on the NSE and TCS declined 4.77% to 2,619. HCLTech and Wipro dropped 4.48% and 3.64%, respectively, while Tech Mahindra was lower by 2.66%. Mid-tier names were also weak, including Coforge (down 5.32%), Persistent (down 3.16% to 5,279) and LTIMindtree (down 3.62% to 5,023). The selling pressure was described as so broad on one Friday that every stock in the Nifty IT index was in the red by 9:31 am.

Fed policy expectations and global demand concerns

The decline was also framed against macro uncertainty ahead of a US Federal Reserve monetary policy meeting, with markets widely expecting the Fed may choose not to cut interest rates yet. Analysts also linked the ongoing weakness to concerns around the global demand outlook, especially in key markets such as the US, amid geopolitical tensions and uncertainty around economic growth.

IT services firms are sensitive to global risk sentiment and currency moves. While a weaker rupee can typically help export-oriented companies, the updates noted that a risk-off environment and global market volatility were weighing on sentiment.

FII selling adds pressure on large caps

Foreign flows were highlighted as another pressure point. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said sustained foreign institutional investor (FII) selling continued to pressure largecap stocks. He added that “FII selling is likely to persist in the near term, and even fundamentally strong sectors and stocks are not immune to this trend.”

Earnings season: revenue growth, profit hit from one-offs

Another cited driver was the recent quarterly results season. The updates said most IT firms managed to grow revenue, but profits were hit by one-time costs linked to new labour rules. The combination of growth with weaker profitability and surprise costs was described as a factor that unsettled investors.

AI-led disruption fears: the ‘Anthropic shock’ narrative

A key theme across multiple updates was concern that rapid advances in artificial intelligence could disrupt traditional IT services delivery models. Traders and analysts cited fears that AI adoption could intensify rivalry, squeeze profitability, and weaken competitive advantages historically enjoyed by IT services companies.

One immediate trigger mentioned was a new offering from Anthropic, known for the Claude chatbot. The launch was described as deepening caution in an already fragile sentiment backdrop. Motilal Oswal also flagged risks, arguing that AI may render traditional software development and testing assignments less critical.

Signals from the US: Nasdaq, ADRs and risk-off spillover

Overseas cues were repeatedly referenced. The Nasdaq Composite was noted as falling 2.03% overnight in one update. Indian IT ADRs also saw sharp moves: Infosys ADR ended down as much as 10% at $14.21 on the NYSE in one session, while Wipro ADR shed 5% to $1.28. In another snapshot, Infosys ADRs were cited down 9.4% to $14.21, edging up 0.49% to $14.28 in after-hours.

ICICI Securities said the Nasdaq IT services basket corrected meaningfully, dragging Indian IT ADRs lower and triggering a risk-off sentiment that spilled into domestic markets.

Correction metrics investors tracked

Several concrete drawdown figures were cited. The Nifty IT index was reported down over 16% in the past month in one update. In another, the index was described as plunging 10.5% in the past two trading days and 12% in the past three days, and slipping 19% in the past eight trading sessions from 38,611.75 on February 3, 2026.

The index had hit a 52-week low of 30,918.95 on April 7, 2025, according to one update. Several stocks including Infosys, TCS and Wipro were also described as hitting new 52-week lows in one session. Separately, a Reuters-linked update said Indian IT shares lost about ₹4.5 lakh crore in market value during a rout sparked by worries about AI’s impact on the sector.

Key numbers at a glance

Why the sell-off matters

The updates positioned IT as a major profit pool for India Inc, meaning a sharp sector drawdown can influence benchmark sentiment. The selling also reflected a wider debate over long-term unit economics if AI compresses timelines and reduces headcount-based billing. Hiren Dasani, CIO for emerging markets at Whiteoak Capital, was quoted saying the market is pricing uncertainty over whether Indian software firms will be able to retain productivity gains and protect revenues, adding that “nobody can say with confidence where IT business models will land.”

At the same time, market participants also flagged that the real impact of the ‘Anthropic shock’ is yet to be ascertained, and Vijayakumar cautioned that panic selling may not be a good idea, suggesting investors may wait for volatility to settle.

Conclusion

Nifty IT’s sharp fall to near a three-year low was driven by a mix of macro uncertainty around US rates, persistent FII selling pressure, weak risk appetite signalled by ADR moves and the Nasdaq, and growing concerns over AI-led disruption. With policy decisions, global cues and sector-specific narratives in focus, the next major signals for IT stocks will likely come from overseas markets and further clarity on how AI adoption affects deal pipelines and pricing.