Shares of domestic information technology (IT) companies are seeing their steepest selloff in over two decades, as investor concerns over artificial intelligence (AI)-led disruption intensify.
On Tuesday, the sectoral index slumped nearly 5 per cent, taking its month-to-date decline to 21 per cent. The Nifty IT index last closed at 30,054, its lowest level since August 3, 2023.
If the index fails to recover in the remaining three sessions of February, it will mark its worst monthly performance since April 2003.
The latest leg of the selloff follows a report by Citrini Research, which flagged the growing influence of AI across the global technology services industry. The report outlined a scenario in which large Indian IT firms such as Tata Consultancy Services, Infosys, and Wipro could see contract cancellations speed up through 2027 as AI-driven coding tools compress costs and reduce dependence on traditional offshore labour models.
Citrini argued that the core value proposition of Indian IT services — considerable cost arbitrage versus Western peers — is being structurally challenged as the marginal cost of AI coding agents falls sharply. It warned that an unrelenting erosion of services exports could weaken India’s external balance, given the sector’s role as the single largest contributor to the current account surplus.
So far this month, nearly ₹6.2 trillion ($68 billion) in market capitalisation has been wiped out across listed IT companies, with several largecap names slipping to multi-year lows.
Brokerages have also turned more cautious. Earlier this week, Jefferies downgraded Infosys, HCLTech, and Mphasis, citing limited scope for valuation upside amid rising medium-term uncertainty.
“The Nifty IT has fallen 14 per cent and underperformed the Nifty 50 by 12 percentage points year-to-date. While third-quarter results led to earnings upgrades for most IT companies, recent developments in AI have raised concerns over the medium- to long-term growth outlook and triggered valuation derating of up to 27 per cent,” Jefferies said in a note dated February 22.
The brokerage added that stock performance is now likely to be driven more by perceptions of long-term business sustainability than near-term earnings delivery.
 "AI fears deepen IT rout as Nifty IT index hits 30-month low, down 21%")
