Nifty IT logs worst first half since 2003 as AI fears weigh on sector

The Nifty IT index fell 31 per cent in January-June 2026 as AI disruption, weak global demand and slowing growth weighed on India's information technology sector

Information technology stocks had their worst first half in decades, with the Nifty IT index declining 31 per cent in the January-June 2026 period, the steepest decline in the first six months of a calendar year since 2003. In the first half of 2003, the Nifty IT index declined 32 per cent.

 

The IT index was the worst-performing sectoral index.

 

IT majors Infosys, which declined 38.07 per cent, Tata Consultancy Services, which fell 37 per cent, and Wipro, which fell 35 per cent, were among the biggest losers in the Nifty pack.

 

The sharp correction in IT stocks reflects growing concerns that the sector is undergoing a structural transformation rather than a temporary slowdown. Market experts believe the risk of AI-driven revenue deflation could intensify over the next few years, potentially bringing the wealth-creation phase for large-cap IT companies to an end. While these companies may continue to offer tactical trading opportunities due to their size, liquidity and periodic sentiment-driven rallies, their long-term growth prospects have weakened considerably.

 

 

India's IT services industry has matured into a billion-dollar export sector, making the high growth rates of the past mathematically difficult to sustain. Despite the rupee's sharp depreciation, IT firms have failed to meaningfully expand margins, highlighting weak global demand and reduced pricing power. AI is also disrupting the traditional manpower-based billing model. Experts warn that investors should therefore avoid treating the current correction as a broad buying opportunity. Instead, they should remain selective, focusing on company-specific opportunities rather than expecting sector-wide wealth creation.