IT shares in focus as ADRs slide overnight; why are tech stocks falling?

IT shares sell-off: Shares of Indian IT (information technology) services companies witnessed a marginal recovery on Thursday, February 5, 2026, following a sharp sell-off in their American Depository Receipts (ADRs) overnight.

 

ADRs of Wipro and Infosys fell by up to 3.3 per cent on Wednesday, extending losses after declining around 6 per cent amid rising concerns about the global tech sector.

 

On Thursday, the Nifty IT index was trading almost flat with a negative bias. Around 9:35 AM, shares of Wipro and Infosys were trading marginally higher.

 

On Wednesday, the Nifty IT index fell nearly 6 per cent to hit a low of 35,809.50, as all index constituents settled in red. Shares of Infosys, TCS, Coforge, LTIMindree, Persistent Systems, Mphasis, HCL Tech, Tech Mahindra and Wipro fell in the range of 3 to 8 per cent.   Here's why Indian IT stocks are in focus:

 

 

The sell-off came after artificial intelligence startup Anthropic launched a AI-powered productivity tool for in-house lawyers. The development has raised concerns for software companies owing to perceived threats to their business models after the emergence of artificial intelligence. 

 

Prasenjit Paul, equity research analyst at Paul Asset & Fund Manager at 129 Wealth Fund, said the sharp correction in IT heavyweight stocks validates a structural shift: generic service models relying on headcount are facing an existential test as agentic AI automates volume-based tasks. 

 

However, Anthropic said the tool is designed to handle routine legal work such as contract checks, non-disclosure agreement reviews, legal summaries, and standard drafting tasks. It is part of the company's AI assistant Claude and functions like a plugin for in-house legal teams.

 

It further clarified that the tool does not give legal advice and said that lawyers must review any AI-generated content before it is used.

 

"However, we view this as a bifurcation opportunity and are actively allocating capital to specialised IT firms; those serve niche verticals like healthcare giants and global OEMs. By deploying agentic AI to decouple revenue from manpower costs, niche smaller IT firms are poised for significant margin expansion and a massive valuation re-rating," Paul said.  

Ravi Singh, chief research officer at Master Capital Services, said the Indian IT sector faces a genuine inflection point, as major companies are systematically incorporating AI lead solutions in addition to legacy offerings. He noted that enterprise demand for AI agents and workflow automation has moved from experimentation to scalable deployments, while established IT companies retain an edge due to strong client relationships and the capital to acquire AI capabilities.

 

On the market reaction, Singh said the recent sell-off reflects heightened sensitivity rather than panic, adding that sharp AI-led rallies in US technology stocks have pushed valuations to elevated levels, making them prone to abrupt reactions to unexpected developments. He added that while AI disruption is real, its impact will unfold over time, and long-term investing will hinge on execution, AI adaptation and reasonable valuations rather than headline-driven volatility.

 

He advised investors to look beyond the suffering giants and focus on specialised 'AI beneficiaries' to capture the next upcycle. 

IT stocks - Technical view

Anand James, chief market strategist at Geojit Investments, said stocks such as TCS, Infosys, HCL Technologies, and Tech Mahindra have shown a turnaround from the recent high on the weekly and daily timeframe backed by strong volumes, indicating the onset of profit booking. Additionally, stocks like Wipro and LTIMindtree have witnessed a weekly MACD bearish crossover, which further supports the possibility of deeper corrections.  "Index heavyweights TCS, Infosys, and Wipro, which together account for nearly 70 per cent of the index weight, have decisively broken below their respective 100-day and 200-day moving averages, highlighting underlying weakness in the index. That said, HCL Technologies and Tech Mahindra are still holding above their key moving average supports; however, a breakdown in these stocks could add further downside pressure to the index," James said.

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