India’s equity market fell sharply on Thursday amid a crash in IT stocks over AI disruption fears and fading hopes for a US Fed rate cut, fueled by strong US jobs data and low unemployment. At the close, the Sensex declined 558.72 points, or 0.66%, to 83,674.92, while the Nifty fell 146.65 points, or 0.57%, to 25,807.20. Broader markets also weakened, with the Nifty Midcap and Smallcap indices slipping 0.5% and 0.64%, respectively.
The IT index tumbled 5.5% on Thursday with heavyweights such as Tech Mahindra, TCS and Infosys falling more than 5% each. Coforge and Oracle Financial Services fell more than 6% each. Top information technology firms are estimated to have lost Rs 1.3 lakh crore in market capitalisation on Thursday due to the sell-off.
IT sector stocks have faced intense selling pressure lately, with the Nifty IT index dropping 12.5% year-to-date in 2026. This downturn largely stems from progress on artificial intelligence (AI) plug-ins developed by Google-backed Anthropic, which automate tasks across various functions and have reignited concerns over disruptions to traditional software models.
Vinod Nair, Head of Research at Geojit Investments said that AI is creating a structural shift in Indian IT services by reducing timelines and automating tasks, putting pressure on the traditional headcount-based outsourcing model. He added that Layoffs are likely in routine-heavy areas as fewer people will be needed to deliver the same outcomes. Even ERP implementation, as highlighted by Palantir’s recent focus, is now vulnerable to AI disruption.
“Clients are shifting toward outcome-based pricing. In the coming quarters, AI adoption could create headwinds for deal wins, potentially impacting topline, making close monitoring of deal flow essential to assess its real impact,” stated Nair.
Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services said that weakness in IT shares followed fading expectations of a near-term US Fed rate cut after better-than-expected January jobs data in the US and investors’ fear that new advanced AI models could automate several traditional IT services potentially impacting future business growth. Khemka added that foreign institutional investors (FIIs) turning net buyers is providing some support to overall sentiment.
FIIs turned net buyers in February after months of selling, purchasing equities worth Rs 5,913 crore so far this month (up to February 11). On Thursday, FII net purchase stood at Rs 108 crore.
Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities said that from a technical standpoint, the benchmark index is still holding above its key moving averages, suggesting that the broader uptrend structure remains intact. However, momentum indicators point towards sideways consolidation in the near term, indicating a potential pause before the next directional move.
“Going ahead, for Nifty, the 50-day EMA zone of 25700-25670 will act as important support for the index. On the upside, the zone of 25900-25940 will act as an immediate hurdle for the index. Any sustainable move above 25940 will lead to a further upside rally up to the 26100 level in the short term,” added Shah.