After three sessions of strong buying interest, information technology (IT) stocks crashed on Wednesday as investors rushed to book profits amid the broader market selloff and ongoing AI-related headwinds for the sector.
Tata Consultancy Services (TCS) was the biggest loser among the large-cap companies with its stock crashing more than 8% to settle at 2,245 apiece while heavyweights such as Infosys, HCL Technologies and Tech Mahindra fell between between 4-6%.
All 10 index constituents of the Nifty IT pack traded significantly lower in trade today, with the sectoral index crashing nearly 6%. LTIMindtree, Coforge and Persistent Systems fell around 7% each. The sharp sell-off in the IT sector, along with persistent global uncertainties, also weighed on broader equity market sentiment with the BSE Sensex falling 303.67 points to 74,346.17, while the NSE Nifty50 declined 77.95 points to settle at 23,405.60.
Sushovon Nayak, Lead IT Analyst, Anand Rathi Institutional Equities said that today’s fall is mainly profit-booking, not a worsening of the business or a fundamental shift – just like the last 2-day rally which was sentiment drive. As per Nayak, IT stocks had jumped on comments from Nvidia chief Jensen Huang at the Taiwan conference that AI agents will be a big multiplier for software usage also calmed fears that AI would dent software demand along with Snowflake's upbeat results recently, hopes of stronger AI-led spending, a weaker rupee, and expectations of US rate cuts.
The up move ran too far too fast, so investors are simply cashing in their gains, added Nayak.
Sunny Agrawal - Head of Fundamental Research at SBI Securities said that fundamentally, nothing has changed when it comes to IT stocks. “We all know that the entire IT sector has been facing pressure related to AI adoption and its deflationary impact on traditional IT services growth. That is precisely why most Tier-1 IT companies have guided for a very muted growth outlook for FY27, indicating low single-digit growth. Similarly, many Tier-2 and Tier-3 IT companies have guided for low double-digit growth during FY27,” added Agrawal.
IT firms have lost up to one-fourth of their value so far in CY2026 over concerns related to AI-led disruptions, particularly following the launch of Google-backed Anthropic’s new Claude AI security tool, which has added to uncertainty around the sector’s earnings outlook.
When asked if India’s IT stocks have bottomed, Nayak said that he expects sharp swings at least until the hype-laden 3 IPOs in the US, because prices now move sharply every time a new AI tool or model launches. But the long-term story stays intact as clients move from building AI to actually using it across their businesses, Indian IT does that hands-on work and several new revenue pools are opening up, added Nayak.
Agrawal said that AI disruption-related challenges still persist in the IT sector. “That said, domestic IT companies are taking proactive steps to expand their total addressable market by partnering with global AI leaders and offering bundled AI-enabled solutions to their clients.”
“This strategy should help mitigate some of the challenges associated with the traditional IT services business. However, I believe the benefits of these initiatives are more likely to be reflected in companies' profit and loss statements beginning FY28 rather than FY27, which is still a few quarters away,” added Agrawal.
